SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Transition Period from ............... to ...............
Commission File Number 0-19407
LASER-PACIFIC MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3824617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
809 N. Cahuenga Blvd.
Hollywood, California 90038
(213) 462-6266
(Address, including zip code and telephone number, including area code of
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the registrant's classes of common
stock, as of August 1, 1997 was 7,128,172 shares of Common Stock, $.0001 par
value.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Table of Contents
Page
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements. . . . . . . . . . . . .1
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . .1
Condensed Consolidated Statements of Operations . . . . . . . . . . . .2
Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . .3
Notes to Condensed Consolidated Financial Statements . . . . . . . . .4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . .5
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .6
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . .6
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .7
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Audited) (Unaudited)
December 31, June 30,
1996 1997
---------------- ----------------
Assets
Current assets . . . . . . . . . . . . $5,278,786 $3,711,560
Net property and equipment . . . . . 17,233,085 15,524,425
Other assets . . . . . . . . . . . . . 650,580 710,998
================ ================
$23,162,451 $19,946,983
================ ================
Liabilities and Stockholders' Equity
Current liabilities . . . . . . . . . $7,777,226 $7,359,529
Notes payable to bank and long-term
debt, less current installments . . . 7,958,554 6,798,601
Minority interest in consolidated
subsidiary. . . . . . . . . . . . . . . 1,325,893 1,291,534
Stockholders' equity:
Common stock, $.0001 par value.
Authorized 25,000,000 shares; issued and
outstanding 7,128,172 shares at December 31,
1996 and 7,128,172 shares at June 30, 1997,
respectively . . . . . . . . . . . . . . . . 713 713
. . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . 19,753,690 19,753,690
Accumulated deficit . . . . . . . . . . . (13,653,625) (15,257,084)
---------------- ----------------
Net stockholders' equity . . . . . . . 6,100,778 4,497,319
---------------- ----------------
$23,162,451 $19,946,983
================ ================
See accompanying notes to condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
---------- ------------ ----------- ------------
1996 1997 1996 1997
Revenues . . . . . . . . $4,939,816 $4,789,069 $12,462,720 $12,429,360
. . . .
Operating costs. . . . . 5,609,016 5,081,011 11,766,033 11,122,672
---------- ------------ ----------- ------------
Gross profit (loss). . (669,200) (291,942) 696,687 1,306,689
Selling, general and administrative
and other expenses . . 1,098,917 1,003,120 2,403,413 2,224,692
---------- ------------ ----------- ------------
(loss) from
Operations. . . . . . (1,768,117) (1,295,063) (1,706,726) (918,003)
Interest expense . . . . 357,453 351,597 754,221 731,666
Other (income) . . . . . (10,958) (3,700) (95,509) (46,210)
---------- ------------ ------------ -----------
Net loss . . . . . . . ($2,114,612) ($1,642,960) $(2,365,438) $(1,603,459)
========== ============ ============ ===========
Net loss per common and common
equivalent shares. . . $(.30) $(.23) $(.33) $(.23)
---------- ------------ ------------ -----------
Weighted average common and
common equivalent shares
outstanding. . . . . . . 7,068,172 7,128,172 7,068,172 7,128,172
========== ============ ============ ===========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
---------------- --- -----------------
---------------- -----------------
1996 1997
Cash flows from operating activities
Net loss . . . . . . . . . . . . . ($2,365,438) ($1,603,459)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization. 2,102,098 2,589,800
Write-off of obsolete property
and equipment. . . . . . . . . . 226,681 ---
Provision for doubtful accounts
receivable . . . . . . . . . . . 141,093 125,993
Other. . . . . . . . . . . . . (113,314) (34,360)
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable. . . . 5,299,309 1,976,695
Inventory. . . . . . . . . 60,305 25,054
Prepaid expenses and
other current assets . . . . (37,736) (372,397)
Other assets . . . . . . . (260,177) (60,417)
Increase (decrease) in:
Accounts payable and
accrued expenses . . . . . . (2,964,769) (46,552)
---------------- -----------------
Net cash provided by operating
activities . . . . . . . . . 2,112,655 2,575,755
---------------- -----------------
Cash flows from investing activities:
Purchases of property and
equipment . . . . . . . . . . (424,433) (568,989)
Net Procedds from disposal of
property and equipment. . . . --- 30,995
---------------- -----------------
Net cash used by investing activities (568,989) (393,438)
---------------- -----------------
Cash flows from financing activities :
Proceeds borrowed under notes payable to bank
and long-term debt. . . . . . . . 1,548,351 758,626
Repayment of notes payable to bank
and long-term debt. . . . . . . . (4,300,461) (2,289,724)
Proceeds from issuance of common stock 426,789 ---
---------------- -----------------
Net cash used by financing activities (2,325,321) (1,531,098)
---------------- -----------------
Net increase (decrease) in cash . . . (318,555) 188,119
Cash at beginning of period . . . . . 812,990 283,082
---------------- -----------------
Cash at end of period . . . . . . . . . $ 494,434 $ 471,201
================ =================
Supplementary disclosure of cash flow information:
Cash paid during the period
for interest . . . . . . . . . . . . $658,952 $731,666
================ =================
See accompanying notes to condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
items) necessary to present fairly the financial position of Laser-Pacific Media
Corporation ("the Company") and its subsidiaries as of June 30, 1997 and
December 31, 1996, the consolidated results of operations for the three and six
month periods ended June 30, 1996 and 1997, and the consolidated statements of
cash flows for the six month periods ended June 30, 1996 and 1997. The Company's
business is subject to the prime time television industry's typical seasonality.
Historically, revenues and income from operations have been highest during the
first and fourth quarters, when production of television programs and demand for
the Company's services is at its highest. The net income or loss of any interim
quarter is seasonally disproportionate to revenues since selling, general and
administrative expenses and certain operating expenses remain relatively
constant during the year. Therefore, interim results are not indicative of
results to be expected for the entire fiscal year.
The Company has a controlling interest (72%) in Pacific Video, Canada Ltd.
("PVC") and in accordance with generally accepted accounting principles have
consolidated the accounts of PVC into these consolidated financial statements.
The amounts of minority interest at June 30, 1997 represent the 28% ownership of
PVC's outstanding capital stock held by minority stockholders of PVC.
In accordance with the directives of the Securities and Exchange Commission
under Rule 10-01 of Regulation S-X, the accompanying consolidated financial
statements and footnotes have been condensed and do not contain certain
information included in the Company's annual consolidated financial statements
and notes thereto.
(2) Loss per Share
Net loss per common and common equivalent shares are based upon the
weighted average number of common and common equivalent shares outstanding.
The outstanding stock options, warrants and convertible notes have not been
included in the calculations as their effect would not be material or would be
anti-dilutive.
(3) Income Taxes
The Company did not provide for income taxes for the six month period
ending June 30, 1997 due to the operating losses incurred.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenues for the six months ended June 30, 1997 decreased to $12,429,000
from $12,463,000 for the same year-ago period, a decrease of $34,000 or 0.3%.
This decrease in revenues is comprised of a decrease of $144,000 in Production
Services and an increase of $110,000 in Film Production Services. The Revenues
for the six months ended June 30, 1997 at the Company's U.S. facilities
decreased $94,000 versus the year-ago period, while revenues from International
Operations increased $60,000 versus the year-ago period.
Revenues for the quarter ended June 30, 1997 decreased to $4,789,000 from
$4,940,000 for the same year-ago period, a decrease of $151,000 or 3.1%. This
decrease in revenues is comprised of a decrease of $15,000 in Production
Services, a decrease of $138,000 in Film Production Services and an increase of
$2,000 in Post Production Services. The Revenues for the quarter ended June 30,
1997 at the Company's U.S. facilities decreased $172,000 versus the year-ago
period, while revenues from International Operations increased $21,000 versus
the year-ago period.
For the six months ended June 30, 1997 the Company recorded a gross profit
of $1,307,000 compared with $697,000 for the same year-ago period, an increase
of $610,000 or 87.5%. Operating costs for six months ended June 30, 1997 were
$11,123,000 versus $11,766,000 for the year-ago period, a decrease of $643,000
or 5.5%. Operating costs, as a percentage of revenues for the six months ended
June 30, 1997 were 89.5% compared with 94.4% for the same year-ago period. The
decrease in operating costs is primarily attributable to reduced depreciation
expense which is explained below.
For the quarter ended June 30, 1997 the Company recorded a gross loss of
$292,000 compared to a gross loss of $669,000 for the same year-ago period, a
decrease of $377,000 or 56.4%. Operating costs for the quarter ended June 30,
1997 were $5,081,000 versus $5,609,000 for the year ago period, a decrease of
$528,000 or 9.4%. Operating costs, as a percentage of revenues for the quarter
ended June 30, 1997 were 106.1% compared with 113.5% for the year ago period.
The decrease in operating costs is primarily attributable to reduced
depreciation expense which is explained below.
Selling, general and administrative (S, G & A), and other expenses for the
six months ended June 30, 1997 were $2,225,000 as compared to $2,403,000 during
the same year-ago period, a decrease of $178,000 or 7.4%. Selling, general and
administrative (S, G & A), and other expenses for the three months ended
June 30, 1997 were $1,003,000 as compared to $1,099,000 during the same year-ago
period, a decrease of $96,000 or 8.7%.
Interest expense for the six months ended June 30, 1997 was $732,000
compared to $754,000 for the same year-ago period, a decrease of $22,000 or
2.9%. Interest expense for the three months ended June 30, 1997 was $352,000
compared to $357,000 for the same year-ago period, a reduction of $5,000 or
1.4%. The reduction in interest expense primarily resulted from a decrease in
the interest rates.
Depreciation expense for the six months ended June 30, 1997 was $2,102,000
compared to $2,590,000 for the same year-ago period, a decrease of $488,000 or
18.8%. Depreciation expense for the three months ended June 30, 1997 was
$1,033,000 compared to $1,314,000 for the same year-ago period, a reduction
of $281,000 or 21.4%. The depreciation expense for both the six and three months
ended June 30, 1996 was higher than the same periods in 1997 due to accelerated
depreciation taken in 1996 which was a result of the obsolescence of the Spectra
Edit system.
Liquidity and Capital Resources
The Company and its subsidiaries are operating under a loan agreement with
The CIT Group/Credit Finance with a maturity date of August 3, 2000. The maximum
credit under the agreement is $9 million. The amended loan agreement provides
for borrowings up to $5.4 million under the term loan (limited to 85% of
eligible equipment appraisal value) and $3.6 million under the revolving loan
(limited to 85% of eligible accounts receivable). At June 30, 1997, $454,000 was
available under the loan agreement. The outstanding balance of the term loan was
$3,808,000 at June 30, 1997. It is payable in monthly installments of $106,000
plus interest at prime plus 2% through August 3, 2000. Principal payments are
<PAGE>
not required in June, July or August. The principal payments may be increased to
compensate for a significant reduction in the appraised value of the assets
which secure the loan. The revolving loan had an outstanding balance of $935,000
at June 30, 1997. It bears interest at prime plus 2% which is payable monthly.
The loan contains automatic renewal provisions for successive terms of two years
after maturity unless terminated as of August 3, 2000 or as of the end of any
renewal term by either party upon at least 60 day written notice.
During May, 1997 CIT Group/Credit Finance agreed to provide the Company
with an additional Loan Accommodation of $600,000 subject to the same terms and
conditions of the loan agreement. The Loan Accommodation is to be repaid in
installments of $32,000 per week commencing August 4, 1997 and continuing weekly
until repaid. The Loan Accommodation is fully due and payable in no event later
than December 15, 1997. The initial advance under the Loan Accommodation was
$125,000. The remaining $475,000 was advanced in increments as the Company
received cash under the short term notes explained below. At June 30, 1996 the
outstanding balance was zero. At July 6, 1997 the outstanding balance on the
Loan Accommodation was $600,000. The Company will pay an accommodation fee of
$20,000 for this transaction.
To fund a cash shortfall in the second and third quarters of 1997, the
Company will issue up to $1,5000,000 of Short-Term Installment (Fixed Rate) Line
of Credit Notes, Series 1997 to qualified purchasers. The Notes are being issued
directly by the company on a Minimum/Maximum basis subject to the purchase of
Notes with an aggregate minimum value of not less than $1,000,000 and not more
than $1,500,000. As of July 21,1997, 35 Lake Avenue, a California limited
partnership subscribed to $1,000,000 of the notes. James R. Parks, the
Company's, Chief Executive Officer, is a partner in 35 Lake Avenue. The
principal balance of each Note bears interest at the rate of fourteen percent
(14%) per annum. The accrued interest on the outstanding principal is payable on
September 30, 1997, December 31, 1997, January 30, 1998, February 28, 1998 and
March 30, 1998. The outstanding principal balance is to be paid in three equal
installments on January 30, 1998, February 28, 1998 and March 31, 1998. The
Company will grant, each purchaser, warrants to purchase one (1) share of the
Company's common stock for each $4.00 of original principal amount. A maximum of
375,000 warrants will be issued. The warrants will expire two years from the
date of grant. The Company's obligations under the Notes are secured by a pledge
of 2,424,488 shares of the Common Stock of Pacific Video Canada Ltd. and a third
priority deed of trust against the building where the Company provides film
processing and sound services.
The Company has an outstanding real estate loan with Bank of America. The
loan is secured by the building where the Company provides film processing and
sound services. The loan agreement matures December 31, 1998 with an option to
extend the maturity an additional year upon payment to the Bank of America of a
$25,000 loan extension fee prior to December 31, 1998. The outstanding balance
as of June 30, 1997 was $1,427,000.
The Company's principal source of funds is cash generated by operations. On
an annual basis, the Company anticipates that existing cash balances and
availability under existing loan agreements and cash generated from operations
will be sufficient to service existing debt. Due to seasonal variations the
Company experienced a cash shortfall in the second quarter of 1997 and
anticipates a cash shortfall in the third quarter of 1997. The cash shortfall
will be financed by the Loan Accommodation from CIT and the Short-Term Notes
issued which are explained above.
As of June 30, 1997, the Company had a working capital deficiency of
approximately $3,600,000 and an accumulated deficit of approximately
$15,300,000, respectively. In addition the Company sustained a net loss of
approximately $1,603,000 for the six months ended June 30, 1997. These factors,
among others, indicate that the Company may be unable to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
obtain financing, generate sufficient cash flow to meet its obligations on a
timely basis and ultimately to attain profitable operations.
<PAGE>
Part II -Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on June 11, 1997, the
following individuals were elected to the Boardof Directors:
Votes For Votes Withheld
Emory M. Cohen 5,470,531 99,600
Cornelius P. McCarthy 5,478,067 92,064
James R. Parks 5,483,067 87,064
Ronald Zimmerman 5,480,531 89,600
The following proposal was approved at the Company's Annual Meeting:
Affirmative Negative Broker
Votes Votes Abstentions Non-Votes
Approval of the Company's
1997 Stock Option Plan 2,224,150 162,500 564,710 1,636,271
Item 5. Other Information - Certain Transactions
During July, 1997 the company issued $1,000,000 of short term notes to 35
Lake Avenue a California partnership as explained in detail under Liquidity and
Capital Resources on page 6. James R. Parks the Company's Chief Executive
Officer is a partner in 35 Lake Avenue. Mr. Parks, is also a principal in the
accounting firm of Parks, Palmer, Turner & Yemendjian (PPT&Y). PPT&Y has in the
past provided, and currently provides, tax and management services to the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Exhibit 10.18A Offering Document for Short Term Installment (Fixed
Rate) Line of Credit Notes, Series 1997
dated July 17, 1997.
10.18B Note for Short Term Installment (Fixed Rate) Line of
Credit Notes, Series 1997 dated July 17, 1997.
10.18C Warrant for Short Term Installment (Fixed Rate) Line of
Credit Notes, Series 1997 dated July 17, 1997.
10.18D Deed of Trust for Short Term Installment (Fixed Rate)
Line of Credit Notes, Series 1997 dated July 17, 1997.
10.18E Stock Pledge Agreement for Short Term Installment
(Fixed Rate) Line of Credit Notes, Series 1997 dated
July 17, 1997.
10.18F Guaranty for Short Term Installment (Fixed Rate) Line
of Credit Notes, Series 1997 dated July 17, 1997.
10.19 Loan and Security Agreements with The CIT Group/Credit
Finance, Inc., dated May 20, 1997.
(b) No reports on Form 8-K were filed during the second quarter covered by this
report.
<PAGE>
Signatures
LASER-PACIFIC MEDIA CORPORATION
Dated: August 14, 1997 /s/James R. Parks
James R. Parks
Chairman of the Board
and Chief Financial Officer
Dated: August 14, 1997 /s/Robert McClain
Robert McClain
Secretary and
Chief Financial Officer
(Principal Financial and Accounting Officer)
LASER-PACIFIC MEDIA CORPORATION
809 North Cahuenga Boulevard
Hollywood, California 90038
July ___, 1997
To: Prospective Purchasers of
Laser-Pacific Media Corporation's
Short-Term Installment (Fixed Rate)
Line of Credit Notes, Series 1997
Ladies/Gentlemen:
Laser-Pacific Media Corporation, a Delaware corporation (the "Company"),
proposes to issue up to $1,500,000 of the Company's Short-Term Installment
Fixed Rate) Line of Credit Notes, Series 1997 (collectively, the "Notes"), to
qualified purchasers. The Notes are being issued directly by the Company on a
"Minimum/Maximum" basis subject to purchase of Notes with an aggregate minimum
value of not less than $1,000,000 and not more than $1,500,000. The Company
reserves the right to cancel this offering if subscriptions for less than
$1,000,000 in Notes are received. However, it is currently anticipated that 35
Lake Avenue, a California limited partnership ("35 Lake"), will purchase not
less than $1,000,000 of the Notes. It is also possible that 35 Lake will
purchase all $1,500,000 of the Notes, in which case no other Notes will be
issued.
All prospective purchasers (each, a "Purchaser" and, collectively, the
"Purchasers") of the Notes should be aware that the purchase of a Note involves
complex business considerations and a high degree of risk. Each purchaser must
be an "accredited investor" as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the "Act"), in order to purchase a Note.
Further, each prospective purchaser should carefully consider the information
set forth herein before reaching a final decision with respect to purchasing a
Note.
EACH PURCHASER REPRESENTS THAT HE OR SHE IS FAMILIAR WITH AND UNDERSTAND
THE TERMS, RISKS AND MERITS OF THIS LETTER. SEE "RISK FACTORS." THE NOTES HAVE
NOT BEEN REGISTERED UNDER THE ACT OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.
NONE OF THE SECURITIES OF THE COMPANY HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER STATE OR FEDERAL AGENCY, NOR HAS
ANY SUCH AGENCY REVIEWED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE
PURCHASERS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM AS LEGAL OR TAX
ADVICE. EACH PURCHASER SHOULD CONSULT HIS OR HER OWN ATTORNEY AND FINANCIAL
ADVISER WITH RESPECT TO LEGAL, TAX AND RELATED MATTERS CONCERNING THIS
INVESTMENT. THE TRANSFERABILITY OF THE NOTES IS HIGHLY RESTRICTED. A PURCHASER
WILL PROBABLY BE UNABLE TO LIQUIDATE HIS OR HER INVESTMENT IN THE NOTES QUICKLY
OR ON ACCEPTABLE TERMS, IF AT ALL, IN THE EVENT HE OR SHE SHOULD DESIRE TO DO
SO. SEE "RISK FACTORS."
<PAGE>
1. THE COMPANY.
For a description of the Company and its business, operations and
prospects, we refer you to the copies of the Company's Proxy Statement and
report on Form 10-K each for the fiscal year ended December 31, 1996, and the
copy of the Company's report on Form 10-Q for the quarterly period ending
March 31, 1997, each attached hereto as Exhibit A.
2. THE OFFERING.
The following summary of the Notes offering is qualified in its entirety by
the terms of the Notes and the other documents described herein.
The Company proposes to issue one or more Notes in an aggregate original
principal amount of not less than $1,000,000 or more than $1,500,000. The
Company reserves the right to cancel the offering and sale of the Notes if
subscriptions for less than $1,000,000 in Notes are received. It is currently
anticipated that 35 Lake will purchase not less than $1,000,000 of the Notes.
It is also possible that 35 Lake will purchase all $1,500,000 of the Notes, in
which case no other Notes will be issued. The Company may, from time to time
prior to September 30, 1997, draw on the Notes, provided that all such draws
will be for at least $50,000. If 35 Lake in fact purchases at least $1,000,000
of the Notes, and the Company issues one or more other Notes in connection with
this offering to any third party, the Company will first draw the total original
principal amount of the Note or Notes issued to 35 Lake prior to drawing from
any other Notes issued in connection with this offering. It is anticipated that
the initial draw on the Notes will be in the amount of $475,000.
The principal balance of each Note will bear interest at the rate of
fourteen percent (14%) per annum. All accrued but unpaid interest on the Notes
will be due and payable on September 30, 1997, December 31, 1997, January 30,
1998, February 28, 1998 and March 30, 1998. Interest not paid when due will bear
interest at the rate of fourteen percent (14%) per annum. The principal balance
of each Note will be due and payable in three equal installments on January 30,
1998, February 28, 1998 and March 30, 1998. The principal balance and accrued
but unpaid interest under the Notes may be prepaid, in whole or in part, from
time to time at the Company's discretion without premium or penalty. Amounts
which are borrowed under the Notes and subsequently repaid may not be
reborrowed. The form of the Notes is attached hereto as Exhibit B.
The Company's obligations under the Notes are secured by a pledge of
2,424,488 shares (the "Pledged Shares") of the common stock of Pacific Video
Canada Ltd., a Canadian corporation incorporated in the province of British
Columbia ("Pacific Canada"), pursuant to the terms of a Pledge Agreement among
the Company and Pacific Video, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Pacific Video"), as pledgers, and the Trustee (as
hereinafter defined), as pledgee. 876,416 of the Pledged Shares are currently
held beneficially and of record by the Company, and 1,548,072 of the Pledged
Shares are currently held beneficially and of record by Pacific Video. Attached
hereto as Exhibit C are Pacific Canada's annual auditor's report for the years
ended October 31, 1996 and October 31, 1995, and quarterly report for the six
months ended April 30, 1997. The Pledged Shares represent 76.74% of the total
issued and outstanding shares of common stock of Pacific Canada. The common
stock of Pacific Canada is traded on the Vancouver Stock Exchange. Pacific
Canada's common stock was most recently traded on May 15, 1997 at Cdn. $0.40 per
share. The current "bid" price per share is Cdn. $0.31 and the current "ask"
price per share is Cdn. $0.50. In 1997, Pacific Canada common stock has traded
as high as Cdn. $0.90 per share and as low as Cdn. $0.40 per share. However,
because the Pledged Shares constitute a majority of the total issued and
outstanding shares of common stock of Pacific Canada, under Canadian law there
may be restrictions on the resale of such shares. See "Risk Factors." The form
of the Pledge Agreement is attached hereto as Exhibit D.
The Company's obligations under the Notes are also secured by a third
priority deed of trust (the "Deed of Trust") against certain real property (the
"Real Property") located at 823-825 North Seward Street, Hollywood, California
owned by Pacific Video. Bank of America, NT & SA has a first priority lien
against the Real Property, which lien secures a loan with a current outstanding
principal balance of approximately $1,427,000. CIT, the Company's primary
lender, has a lien on substantially all of the Company's assets, including a
second priority lien against the Real Property, which secures a $9,000,000 line
of credit. The current outstanding balance of the line of credit is
approximately $4,000,000. Neither the Company nor Pacific Video has obtained a
recent appraisal of the Real Property, so there is no assurance that any equity
will remain in the Real Property to repay the Notes after satisfaction of the
Company's and Pacific Video's obligations to the senior lienholders. In addition
to the two prior liens against the Real Property, there is also currently a tax
lien on record against the Real Property arising out of Pacific Video's failure
<PAGE>
to pay certain property taxes during 1993 and 1994. In November 1995, Pacific
Video entered into an agreement with the County of Los Angeles which provides
for the payment of these delinquent taxes over a five year period. Pacific Video
currently owes $62,137.65 under this agreement, which amount is scheduled to be
paid off in annual installments ending April, 2000. In connection with this
offering, the Company will obtain for the benefit of the Trustee an ALTA
Lender's title insurance policy to be issued by Commonwealth Land Title Company
with respect to the Real Property and providing coverage with limits equal to
the original aggregate principal amounts of the Notes. The form of the Deed of
Trust is attached hereto as Exhibit E.
Further, three wholly-owned subsidiaries of the Company, Pacific Video,
Pacific Film Labs, Inc., a Delaware corporation, and Laser Edit, Inc., a
Delaware corporation, have each guarantied the Company's obligations under the
Notes. The form of the Guaranty is attached hereto as Exhibit F
In addition to the foregoing, the Company will grant each Purchaser
warrants (each, a "Warrant") to purchase one (1) share of the Company's common
stock for each Four Dollars ($4.00) in original principal amount of the Notes
committed to by such Purchaser. The exercise price per share of the Warrants
will be One Dollar ($1.00) per share (subject to adjustments for stock splits,
stock dividends, recapitalizations and similar transactions). Each Warrant shall
expire on the date which is the second anniversary of the date such Warrant is
issued. The form of the Warrant is attached hereto as Exhibit G.
In order to facilitate the exercise of any rights or remedies of the
Purchasers under the Notes, the Pledge Agreement or the Deed of Trust, these
instruments will be issued to, and held by, Alan Pick, an individual (the
"Trustee"), as trustee for the benefit of the Purchasers, pursuant to the terms
of the Trust Indenture Agreement attached hereto as Exhibit H. The Trustee will
not be required to post any bond or other security. Further, the Trustee will
receive a fee for services of $3,500 plus, in the event the Company defaults
under the Notes, an hourly fee of $250 for time spent in reviewing, managing and
administrating the Notes, the Pledge Agreement and the Deed of Trust. All such
fees are payable by the Company.
As the 14% interest rate provided for in the Notes exceeds the generally
permitted maximum rate of interest which may be charged under California law,
the Company has obtained, or will obtain from the California Department of
Corporations, a qualification of the issuance of the Notes, thereby exempting
the Notes from the usury provisions of the California Constitution.
The Company has agreed to pay the reasonable attorneys' fees incurred by
the Purchasers in connection with the review, negotiation and preparation of the
Notes and related documents, provided that in no event will the aggregate amount
of such fees exceed $5,000. The Company has also agreed to pay the reasonable
costs incurred by the Purchasers in connection with the review, negotiation and
preparation of the Notes, including, without limitation, the premium for the
title insurance policy described above.
In connection with the Company's offering of the Notes, CIT, the Company's
current lender, has agreed to match on a "dollar-for-dollar" basis the proceeds
of the offering of the Notes up to $475,000. This additional loan will be made
on the same terms as CIT's current loan to the Company, which terms are
described in the reports on Form 10-K and 10-Q attached hereto as Exhibit A.
Please see Exhibit I attached hereto for a description of the anticipated
cash flow by which the Company's obligations under the Notes are to be repaid.
3. RISK FACTORS.
The Notes involve a high degree of risk. In analyzing whether to purchase
the Notes, prospective Purchasers should carefully consider numerous factors,
including the following:
Lack of Liquidity and Capital Resources; Seasonality of Business. As of
March 31, 1997, the Company had a working capital deficiency of approximately
$2,350,000 and an accumulated deficit of approximately $13,600,000. In addition,
the Company sustained a net loss of approximately $1,850,000 for the fiscal year
ended December 31, 1996. These factors, among others, indicate that the Company
may be unable to continue as a going concern. KPMG Peat Marwick LLP, the
Company's auditors, have so qualified their opinion to the Company's financial
statements included in the report on Form 10-K attached hereto as Exhibit A.
The financial statements included in the reports on Forms 10-K and 10-Q attached
hereto as Exhibit A do not include adjustments that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to obtain additional financing
(including through the offering of the Notes and the additional financing to be
provided by CIT), generate sufficient cash flow to meet its obligations on a
timely basis and ultimately to attain profitable operations. In that connection,
the Company's principal source of funds is cash generated by operations.
<PAGE>
However, the Company's business is highly seasonal, in that the Company derives
a substantial percentage of its revenue from post-production work for television
programs and the need for television post-production work is significantly
reduced during the second and third calendar quarters. Therefore, it is likely
that a significant percentage of the Company's cash flows between the date
hereof and September 30, 1997 will be from the proceeds from the sale of the
Notes and the proceeds of the additional financing to be made by CIT. Although
management of the Company is of the opinion that the Company will be able to
meet its obligations on a timely basis, sustain operations through the funds
generated by the sale of the Notes and the additional financing provided by CIT,
and eventually achieve profitable operations, there is no assurance that these
uncertainties will be settled or that management's plan will be achieved.
Lack of Liquidity of Notes and Warrants. The offer and sale of Notes and
the Warrants have not been registered pursuant to the Act or any state
securities law, and there is no market for the resale of the Notes or the
Warrants. Therefore, Notes and Warrants should only be purchased by those having
substantial net worth and no need for liquidity. Further, the Company is under
no obligation to register under the Act or any state securities laws any of the
shares of the Company's common stock issuable upon exercise of the Warrants, and
there is no assurance that the holder of such shares will be able to resell any
of such shares pursuant to an exemption therefrom (including, without
limitation, pursuant to Rule 144 promulgated under the Act). Additionally, even
if the holder of such shares is legally permitted to resell such shares, there
is no assurance that a public market for the Company's common stock will exist
at that time and that the holder of such shares will actually be able to
liquidate his or her holdings.
Lack of Liquidity of Pledged Shares. Although the common stock of Pacific
Canada is traded on the Vancouver Stock Exchange, because the Pledged Shares
constitute a majority of the total issued and outstanding shares of common stock
of Pacific Canada, Canadian law may impose certain restrictions on the resale of
such shares after a foreclosure by the Trustee. If there is a foreclosure, the
Trustee, as the holder of 20% or more of the outstanding common shares of
Pacific Canada, will be deemed to be a "control person" for purposes of the
British Columbia Securities Act (the "BC Act"). The BC Act generally prohibits a
"control person" from selling its shares without the delivery of a prospectus.
Although the BC Act contains certain exemptions from the prospectus delivery
requirement, there is no assurance that the Trustee would be able to avail
itself of any such exemption. Further, if the Trustee offers to sell 20% or more
of the outstanding common shares of Pacific Video for consideration (including
brokerage fees or commissions) in excess of 115% of the market price of said
securities, the BC Act requires that the prospective purchaser offer to purchase
all outstanding common shares of Pacific Video at the same price. Thus, the
provisions of the BC Act could materially adversely affect the ability of the
Trustee to resell the Pledged Shares after a foreclosure.
Third Priority Lien; Default under Senior Liens. The lien on the Real
Property being granted to the Trustee for the benefit of the Purchasers is a
third priority lien, and there is no assurance that, if a default under the Deed
of Trust or any other senior or junior encumbrance on the Real Property occurs,
there will be any funds available to repay the Notes after repayment of Pacific
Video's and the Company's obligations to the two senior lienholders.
Additionally, because Pacific Video failed to timely pay property taxes on the
Real Property during 1993 and 1994, it has already violated the terms of the two
senior deeds of trust against the Real Property. Although Bank of America has
formally waived this non-compliance, CIT has not formally done so and it is
possible that CIT could attempt to declare a default under the terms of its deed
of trust and foreclose on the Real Property based on this non-compliance.
Increase in CIT Debt. CIT, the Company's primary lender, has liens on
substantially all of the assets of the Company. In connection with the Company's
offering of the Notes, CIT has agreed to match on a "dollar-for-dollar" basis
the proceeds of the offering of the Notes up to $475,000. This additional loan
will increase the likelihood that the Company may default in the repayment of
its obligations, which default, among other things, could allow CIT to foreclose
on the Company's assets. As such, any such default would have a material adverse
effect on the Company's business, operations and prospects.
Conflict of Interest. James R. Parks, Chairman of the Board and Chief
Executive Officer of the Company, is a principal in the accounting firm of
Parks, Palmer, Turner & Yemenidjian ("PPT&Y"). PPT&Y has in the past provided,
and currently provides, tax and management services to the Company.
dditionally, PPT&Y and Mr. Parks may also be providing accounting services to
one or more of the prospective Purchasers, including 35 Lake. Further, Mr. Parks
is a limited partner in 35 Lake and he and/or PPT&Y may have an ownership
interest in or otherwise control the management of one or more other prospective
Purchasers. In light of the foregoing conflict of interest, Mr. Parks has
indicated that he will not participate on behalf of the Company or Pacific Video
in connection with the offering of the Notes. Without limiting the generality of
the foregoing, Mr. Parks has indicated that he will abstain on all matters
<PAGE>
presented to the Company's Board of Directors regarding or in connection with
the offering of the Notes. Both Joel Michael Kantor (counsel for the Purchasers)
and the Trustee, and their respective law firms, have in the past performed and
currently perform certain legal services for the Company and Pacific Video.
However, neither Mr. Kantor nor the Trustee represents the Company or Pacific
Video in connection with the Notes and the transactions being entered into in
connection with the Notes.
4. USE OF PROCEEDS.
The Company intends to use the proceeds from the sale of the Notes to fund
its working capital needs.
5. TAX CONSIDERATIONS.
In most cases, Purchasers who exercise the Warrants will be required to
recognize income equal to the then current fair market value of the shares of
the Company's common stock issued upon exercise of the Warrant minus the
exercise price paid by the Purchaser to the Company upon exercise. This tax will
be due despite the fact that there is no assurance that the Purchaser will then
be able to resell such shares in order to pay the tax.
<PAGE>
* * *
The Company strongly urges you to read all of the enclosed documents, as
well as all other materials which may be provided to you by the Company in
connection with the offering of the Notes. Should you have any questions
regarding the proposed transactions or the enclosed documents, please contact
Bob McClain, the Chief Financial Officer of the Company, at (213) 960-2180.
Very truly yours,
LASER-PACIFIC MEDIA CORPORATION
By:___________________________
Its:__________________________
<PAGE>
SUBSCRIPTION DOCUMENTS
LASER-PACIFIC MEDIA CORPORATION
a Delaware corporation
("the Company")
Each subscriber must complete and sign the Subscription Documents in accordance
with the following instructions. Subscribers must meet certain requirements in
order for the Company, to comply with the offering exemptions from registration
and qualification under the federal Securities Act of 1933 and applicable state
securities laws. The Company will be relying on the accuracy and completeness of
information provided in the Subscription Documents to establish the
qualifications of prospective investors and the Company's legal right to sell
these securities. Answers will at all times be kept strictly confidential,
unless necessary to establish the legality of a prospective investor's
participation in the offering. The Company should be contacted immediately if
there is any change in the information the prospective investor has provided.
INSTRUCTIONS
<PAGE>
1. Complete and sign (a) the SUBSCRIPTION AGREEMENT, and (b) the
CONFIDENTIAL PURCHASER QUESTIONNAIRE attached hereto.
2. Return all documents, together with a check payable to the Company in
the amount indicated in Paragraph 1 of the Subscription Agreement for the
securities subscribed for to:
LASER-PACIFIC MEDIA CORPORATION
809 N. Cahuenga Blvd.
Hollywood, California 90038
3. The following sets forth the number of signatures required for different
forms of ownership:
Individual One signature required.
Joint Tenants With Right Both parties must sign.
of Survivorship:
Tenants in Common: All parties must sign.
Community Property: One signature required if security will
be held in one name, i.e., managing spouse;
two signatures required if security will
be held in both names.
Corporation: Signature of authorized officer or officers
required.
Partnership: Signature of general partner required;
additional signatures only if required by
partnership agreement.
Trust: Trustee's signature must indicate "Trustee
for the ________ Trust."
Other Entities: As required by the applicable document.
<PAGE>
SUBSCRIPTION AGREEMENT
LASER-PACIFIC MEDIA CORPORATION
A Delaware corporation
THE SECURITIES OFFERED HEREUNDER (THE "SECURITIES") HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION
PROVIDED IN THE ACT AND THE RULES AND REGULATIONS THERETO, NOR HAVE THE
SECURITIES BEEN REGISTERED OR QUALIFIED UNDER ANY STATE'S SECURITIES LAWS.
ACCORDINGLY, IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SECURITIES
UNLESS (1) THE SECURITIES ARE SUBSEQUENTLY REGISTERED OR QUALIFIED UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR EXEMPTIONS THEREFROM ARE AVAILABLE, AND
(2) THE TRANSFEROR PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT THE PROPOSED SALE OR TRANSFER WILL NOT CAUSE A VIOLATION OF THE
ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
(Please complete all blanks before execution)
Date: ____________________, 1997
This Subscription Agreement is entered into by and between
______________________ (the "Subscriber") and LASER-PACIFIC MEDIA CORPORATION, a
Delaware corporation (the "Company") as of the date it is accepted below by
the Company.
1. Subscription. The Subscriber hereby subscribes to purchase $____________
Short-Term Installment (Fixed Rate) Line of Credit Notes (the "Notes"), plus one
(1) common stock purchase warrant for each Four Dollars ($4.00) of principal
investment in the Notes (the "Securities") being offered by the Company in this
offering (the "Offering"). Attached or enclosed is (i) the Subscriber's check in
the amount of $_____________________ payable to the Company in full payment for
the Securities subscribed for purchase, and (ii) a completed and duly executed
Purchaser Questionnaire, a copy of which is attached hereto.
The Subscriber understands that prior to consummation of the Offering, the
aforementioned funds will be held by the Company in a segregated account,
subject to any rescission rights under applicable state securities laws. The
Subscriber understands that if and to the extent this subscription is not
accepted in whole or in part, any amount so received into said account will be
returned to the Subscriber without deduction therefrom and without interest
thereon. The Company will hold all proceeds received in this Offering in a
segregated trust account at the Company's bank until the earlier of (i) the
Company's acceptance of subscriptions for $1,000,000, or (ii) _________________,
1997 (unless extended by the Company, in its sole discretion, to a date no later
than ______________, 1997) (the "Offering Period"). If the Company does not
obtain and accept subscriptions for at least $1,000,000 prior to expiration of
the Offering Period, all proceeds of this Offering shall be returned to
subscribers without any deduction therefrom or interest thereon. The Subscriber
agrees that this subscription shall be irrevocable and shall survive the death
or disability of the Subscriber.
2. Acceptance. Acceptance by the Company shall be evidenced by its delivery
to Subscriber of a fully-executed Subscription Agreement. Execution of this
Agreement by the Subscriber does not require the Company to accept any
subscription and this Agreement shall not be binding unless and until accepted
by the Company.
3. Subscriber's Representations. The Company is offering and shall issue
the Securities subscribed for in this Agreement without registering them
pursuant to the Securities Act of 1933, as amended (the "Act"). The Company is
doing so in reliance upon, among other things, the Subscriber's following
representations:
(a) Accuracy of Information and Subscriber's Representations. The
Subscriber's representations in this Agreement and the information contained in
the Subscriber's Purchaser Questionnaire are complete and accurate to the best
of the Subscriber's knowledge, and the Company may rely upon them. The
Subscriber will notify the Company immediately if any material change occurs in
any of this information before the sale of the Securities.
(b) Experience. The Subscriber is either an "accredited investor," as
defined by Rule 501 promulgated by the Securities and Exchange Commission
(the "SEC") under the Act, or the Subscriber has the capacity to protect its,
his or her own interest in connection with this purchase, either by reason of
its, his or her business or financial experience or the business or financial
experience of a professional advisor who is unaffiliated with and uncompensated
by the Company (the "Purchaser Representative").
<PAGE>
(c) Investment. The Subscriber is acquiring the Securities for
investment for the Subscriber's own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof. The
Subscriber understands that, by reason of a specific exemption from the
registration provision of the Act, the Securities have not been and will not be,
registered under the Act, and that the availability of such exemption depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Subscriber's representations as expressed herein.
(d) Access to Data. The Subscriber has reviewed the offering materials
distributed with a letter dated ___________________, 1997 and any amendments or
supplements thereto (the "Offering Materials") relating to the offering for sale
of Securities of the Company, including, without limitation, the Company's:
(i) Annual Report on Form 10-K for the period ended December 31, 1996; (ii)
Quarterly Report on Form 10-Q for the period ended March 31, 1997; and (iii)
Proxy Statement issued in connection with the Company's Annual Stockholder's
Meeting to be held June 11, 1997. The Subscriber understands that an investment
in the Company involves an extremely high degree of risk, including the risks
set forth under the caption entitled "Risk Factors" in the Offering Materials.
The Subscriber and the Subscriber's Purchaser Representative(s), if any, have
been furnished all materials relating to the Company, its business and financial
condition, the Offering and any other matter set forth in the Offering Materials
which they have requested and have been afforded the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Offering and to obtain any additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information set forth in the Offering
Materials. No oral representations have been made or oral information furnished
to the Subscriber or the Subscriber's Purchaser Representative(s) in connection
with the Offering that were in any way inconsistent with the Offering Materials.
(e) Rule 144. The Subscriber acknowledges that the Securities must be
held indefinitely unless subsequently registered under the Act or unless an
exemption from such registration is available. The Subscriber is aware of the
provisions of Rule 144 promulgated under the Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including among other things, the existence of a public
market for the securities, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of securities being sold during any three-month
period not exceeding specified limitations.
(f) Authorization. This Agreement when fully executed and delivered by
the Company will constitute a valid and legally binding obligation of the
Subscriber, enforceable in accordance with its terms. The Subscriber, if it is a
partnership, joint venture, corporation, trust or other entity, was not formed
or organized for the specific purpose of acquiring the Securities. The purchase
of the Securities by the Subscriber, if it is an entity investor, is a
permissible investment in accordance with the Subscriber's Articles of
Incorporation, By-Laws, Partnership Agreement, Declaration of Trust or other
similar charter document, and has been duly approved by all requisite action by
the entity's owners, directors, officers or other authorized managers. The
person signing this document and all documents necessary to consummate the
purchase of the Securities has all requisite authority to sign such documents on
behalf of the Subscriber, if it is an entity investor.
(g) No Duplication. The Subscriber has not duplicated or distributed
the Offering Materials to anyone other than his Purchaser Representative or
other personal advisors, and will not do so in the future.
(h) No General Solicitation. The Securities offered hereby were not
offered to the Subscriber by way of general solicitation or general advertising
and at no time was the Subscriber presented with or solicited by means of any
leaflet, public promotional meeting, circular, newspaper or magazine article,
radio or television advertisement.
(i) Residence. The Subscriber is a bona fide resident at the address
set forth below under the Subscriber's name.
<PAGE>
4. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Subscriber the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the SEC that may at any time permit the
Subscriber to sell securities of the Company to the public without registration,
the Company agrees to use its best efforts to:
(a) Furnish Public Information. The Company shall make and keep public
information available, as those terms are understood and defined in Rule 144. So
long as the Subscriber owns any Securities, the Company shall furnish to such
Subscriber forthwith upon request a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company as may be reasonably requested in availing the Subscriber of any rule or
regulation of the SEC permitting the selling of any such securities without
registration.
(b) File Reports. The Company shall file with the SEC in a timely
manner all reports and other documents required of the Company under the Act and
the Securities Exchange Act of 1934, as amended.
5. Indemnification Under This Agreement. The Subscriber shall indemnify and
hold harmless the Company, and its affiliates, from and against all losses,
damages and liabilities (including, but not limited to, court costs and
reasonable attorneys' fees) arising or resulting from, or attributable to, any
<PAGE>
breach of the representations and warranties set forth in Paragraph 3 of this
Subscription Agreement, or in any other document furnished by the Subscriber to
any of the foregoing parties, or the fact that any of the representations,
acknowledgements or understandings set forth in Paragraph 3 are untrue or
without adequate factual basis to be considered true and not misleading.
6. Power of Attorney of Spouse. If the Subscriber is a married person, the
Subscriber agrees to cause the Subscriber's spouse to execute this Agreement at
the space provided for that spouse's signature immediately following the
signature of the Subscriber, and by such signature hereto said spouse certifies
that said spouse is the spouse of the person who signed this Agreement, that
said spouse has read and approves the provisions hereof and hereby consents and
agrees to this Agreement and agrees to be bound by and accepts such provisions
of this Agreement in lieu of all other interests said spouse may have in the
Company, whether such interest be community property or otherwise. Said spouse
grants to the Subscriber irrevocable power of attorney to represent said spouse
in all matters connected with the Company to the end that, in all cases, the
Company may rely on any approval, direction, vote or action taken by the
Subscriber, as said spouse's attorney-in-fact. Such power of attorney is, and
shall be deemed to be, coupled with an interest so that the authority granted
hereby may continue during the entire existence of the Company and regardless of
the death or incapacity of the spouse granting the same. Said spouse further
agrees to execute, acknowledge and deliver such other and further instruments
and documents as may be required to evidence such power of attorney.
7. Entirety. The terms of this Agreement are intended by the parties as a
final expression of their agreement with respect to the terms included in this
Agreement and may not be contradicted by evidence of any prior or
contemporaneous agreement, arrangement, understanding or negotiation (whether
oral or written).
8. Waiver. No waiver or modification of any of the terms of this Agreement
shall be valid unless in writing. No waiver of a breach of, or default under,
any provision hereof shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10. Notices. Except as otherwise required in this Agreement, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid,
addressed as follows:
To the Company: Laser-Pacific Media Corporation
809 N. Cahuenga Boulevard
Los Angeles, California 90038
To the Subscriber: At the address set forth beneath
the Subscriber's signature
Any party may change their address for notice in accordance with the provisions
of this Paragraph.
11. Non-Assignability. The obligations of the Subscriber hereunder shall
not be delegated or assigned to any other party without the prior written
consent of the Company.
12. Expenses. Each party shall pay all of its costs and expenses that it
incurs with respect to the negotiation, execution and delivery of this
Agreement.
13. Applicable Law. This Agreement shall be construed and enforced pursuant
to the laws of the State of California applicable to contracts to be performed
entirely therein, without reference to California choice of law rules.
14. Form of Ownership. Please indicate the form of ownership of the
Securities:
____ Individual
____ Joint Tenants with Right of Survivorship
____ Tenants in Common
<PAGE>
____ Community Property
____ Trust
____ Corporation
____ Partnership
____ Limited Liability Company
____ Other:________________________________
15. Survival. All representations, warranties and covenants contained in
this Subscription Agreement shall survive the acceptance of the subscription.
The Subscriber acknowledges and agrees that this Subscription Agreement shall
survive (i) changes in the transactions, documents and instruments described in
the Offering Materials which are not material, and (ii) the death or disability
of the Subscriber.
16. Gender, Number, Etc. Terms used herein in any number or gender include
other numbers or genders, as the context may require. If the Subscriber is an
entity, all references to "him" or "his" shall be deemed to include "it" or
"its".
[SIGNATURE ON NEXT PAGE]
<PAGE>
INDIVIDUAL(S) SIGN HERE: SUBSCRIBER:
__________________________________________________ ____________________
(Signature)
__________________________________ ____________________________________
(Print Name)
__________________________________ ____________________________________
__________________________________ ____________________________________
(Address)
Social Security #:_________________
Number of Securities Subscribed
for Purchase:_____________________
SPOUSE OF SUBSCRIBER:
__________________________________ ____________________________________
(Signature)
ORGANIZATIONS SIGN HERE: SUBSCRIBER:
__________________________________ ____________________________________
(Print Name of Organization)
By:______________________________ _____________________________________
(Signature)
_________________________________ _____________________________________
(Print Name and Title)
__________________________________ ____________________________________
__________________________________ ____________________________________
(Address)
Federal ID#:______________________
Number of Securities Subscribed
for Purchase:_____________________
ACCEPTED:
LASER-PACIFIC MEDIA CORPORATION
By:______________________________________
Date:____________________________________
<PAGE>
CONFIDENTIAL PURCHASER QUESTIONNAIRE
LASER-PACIFIC MEDIA CORPORATION
a Delaware corporation
SPECIAL INSTRUCTIONS
In order to establish the availability under federal and state securities
laws of an exemption from registration or qualification requirements for the
proposed Offering, you are required to represent and warrant, and by executing
and delivering this questionnaire will be deemed to have represented and
warranted, that the information stated herein is true, accurate and complete to
the best of your knowledge and belief, and may be relied on by the Company.
Further, by executing and delivering this questionnaire you agree to notify the
Company and supply corrective information promptly if, prior to the consummation
of your purchase of the Securities, any such information becomes inaccurate or
incomplete. Your execution of this questionnaire does not constitute any
indication of your intent to subscribe for the Securities. No offer of the
Securities will be made unless accompanied by the Offering Materials dated
_____________, 1997 together with any supplements thereto, describing the
proposed Offering.
A subscriber who is a natural person must complete each Question except for
2, 5 and 6.
A subscriber that is an entity other than a trust must complete each
Question except for 3 and 5.
A subscriber that is a trust must complete each Question except for 3.
GENERAL INFORMATION
1. All Subscribers
A. Name(s) of prospective investor(s):
B. Address:
__________________ Tel. No. (___)
C. Address for communications (if different):
Tel. No. ( )
2. Subscribers That Are Entities
A. Type of entity:
___ Trust
___ Corporation
___ Partnership
___ Limited Liability Company
___ Joint Subscribers (Other than husband and wife)
___ Other:
B. State and date of legal formation:
C. Nature of Business:
D. Was the entity organized for the specific purpose of acquiring
the securities in this offering?
Yes ______ No ______
E. Federal tax identification number: __________________
<PAGE>
3. Subscribers Who Are Individuals
A. State where registered to vote:
B. Social Security Number:
C. Please state the subscriber's education and degrees earned:
Degree School Year
______________ _________________________ _________
______________ _________________________ _________
D. Current occupation (if retired, describe last occupation):
Employer:
Nature of Business:
Position:
Business Address:
_________________ Tel. No. (__)
ACCREDITATION
4. Does the subscriber satisfy one or more of the following accredited
investor requirements?
A. Institutional Test
Is the subscriber any one of the following: (i) a bank as defined
in Section 3(a)(2) or a savings and loan association as defined in
Section 3(a)(5)(A) of the Securities Act of 1933 whether acting in its
individual or fiduciary capacity; (ii) any broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; (iii) an
insurance company as defined in Section 2(13) of the Securities Act of
1933; (iv) an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; (v) a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; (vi) an employee
benefit plan established and maintained by a state or any of its
political subdivisions or an agency of such state or political
subdivision, if such plan has total assets in excess of $5,000,000;
(vii) an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, where the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, that is either a bank, insurance company, or registered
investment adviser, or where the employee benefit plan has total assets
in excess of $5,000,000, or, if a self-directed plan, investment
decisions are made solely by persons that are accredited investors and
for the benefit of such persons; (viii) a private business development
company as defined in Section 202(a)(22) of the Investment Advisors Act
of 1940; or (ix) a non-profit charitable organization described in
Section 501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust or partnership not formed for
the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000?
Yes ______ No ______
If yes, please give the number of the category as listed above within
which the subscriber falls.
_______________________
<PAGE>
B. Individual $1,000,000 Net Worth Test
Is the subscriber a natural person who, together with spouse (if
applicable), has a net worth in excess of $1,000,000?
Yes ______ No ______
C. Individual $200,000 Income Test
Is the subscriber a natural person who has income in excess of
$200,000 in each of the two preceding years and reasonably expects to
have income in excess of $200,000 in the current year?
With spouse: Yes ______ No ______
Without spouse: Yes ______ No ______
D. Joint $300,000 Income Test
Is the subscriber a natural person who, together with his or her
spouse, has joint income in excess of $300,000 in each of the two
preceding years and reasonably expects to have income in excess of
$300,000 in the current year?
Yes ______ No ______
E. Affiliation Test
Is the subscriber a director or executive officer of Company?
Yes ______ No ______
5. Trusts
Does the trust meet the following tests:
A. Has total assets in excess of $5,000,000?
Yes No
B. Was formed for the purpose of an investment in the securities in
this offering?
Yes No
C. Has its purchases directed by a sophisticated investor who, alone
or with his or her subscriber representative, understands the merits
and risks of an investment in the Securities?
Yes No
6. Entities With All Accredited Owners
A subscriber may also be accredited if all its equity owners are
accredited under one or more of the Accreditation Tests identified in
Question 4. (The equity owners of an investor are, for example,
shareholders, general partners and limited partners.)
<PAGE>
Therefore, if the subscriber is an entity that did not answer yes to
Question 4A above, please answer each of the questions set forth below.
A. Are all of the equity owners of the entity accredited investors
under one or more of the Accreditation Tests of Questions 4A, 4B, 4C,
4D or 4E?
Yes ______ No ______
B. If yes, please list below the name of each equity owner and the
category or categories ("Institutional Test," "$1,000,000 Net Worth
Test,"$200,000 Income Test," "$300,000 Income Test" or "Affiliation
Test") under which the owner is an accredited investor.
Name Category
1. ___________________________
2. ___________________________
3. ___________________________
4. ___________________________
5. ___________________________
6. ___________________________
Use additional sheets, if necessary, to complete list.
RELIANCE ON PURCHASER REPRESENTATIVE
7. Has the subscriber relied on the advice of a Purchaser Representative in
connection with evaluating the merits and risks of its prospective purchase
of the securities in this offering?
Yes ______ No ______
If yes, please give the name, address and telephone number of the person
who is acting as the Purchaser Representative.
Name:
Address:
Telephone number: (___)
REPRESENTATIONS
8. How often does the subscriber invest in securities?
Often ______ Occasionally _____ Never _____
9. Please list below the subscriber's most recent investments (up to three):
<PAGE>
Amount of
Name of Investment When Purchased Investment
____________________________ ______________ __________
____________________________ ______________ __________
____________________________ ______________ __________
10. Does the subscriber, either alone or together with its Purchaser
Representative identified above, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the securities in this offering?
Yes ______ No ______
11. Does the subscriber, either alone by reason of its business or financial
experience or together with its Purchaser Representative, have the capacity
to protect its own interests in connection with a purchase of the securities
in this offering?
Yes ______ No ______
12. Is the subscriber (or the trust beneficiary for which it is the fiduciary)
able to bear the economic risk of the investment, including a complete loss
of the investment?
Yes ______ No ______
13. Does the subscriber have any other investments or contingent liabilities
which could cause the need for sudden cash requirements in excess of cash
readily available to the subscriber?
Yes ______ No ______
If Yes, explain:
14. Does the subscriber have a net worth or joint net worth with his or her
spouse which is at least five times as great as the purchase price of the
securities subscribed for purchase?
Yes ______ No ______
15. If 25% or more of the subscriber's total assets are represented by
investments in the subscriber's own company or real estate, are all
liabilities associated with them included as personal liabilities?
Yes ______ No ______
If No, what is the dollar amount of each such liability?
$_____________________
<PAGE>
16. Has the subscriber ever been subject to bankruptcy, reorganization or debt
restructuring?
Yes ______ No ______
If Yes, provide details:
17. Is the subscriber involved in any litigation which, if an adverse decision
occurred, would adversely affect the subscriber's financial condition?
Yes ______ No ______
If Yes, provide details:
18. Does the subscriber confirm that neither the subscriber nor the subscriber's
broker nor Purchaser Representative became aware of or was introduced to the
Company by means of any advertisement?
Yes ______ No ______
19. Does the subscriber confirm that the foregoing statements are complete and
accurate to the best of its knowledge and belief, and that it undertakes to
notify the Company regarding any material change in the information set
forth above prior to the closing of the purchase by it of the securities in
this offering?
Yes ______ No ______
<PAGE>
INDIVIDUAL(S) SIGN HERE: SUBSCRIBER:
__________________________________ _______________
(Signature)
__________________________________ _______________
(Print Name)
__________________________________ _______________
__________________________________ _______________
(Address)
Social Security #:________________ _______________
Number of Securities Subscribed
for Purchase:_____________________
SPOUSE OF SUBSCRIBER:
__________________________________ _______________
(Signature)
ORGANIZATIONS SIGN HERE: SUBSCRIBER:
________________________________________________
(Print Name of Organization)
By:_____________________________________________
(Signature)
____________________________________________
(Print Name and Title)
_____________________________________________
_____________________________________________
(Address)
Federal ID#:_____________________________________
Number of Securities Subscribed
for Purchase:____________________________________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(COLLECTIVELY "ACT"), OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS NOTE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR (B) IF MAKER HAS BEEN FURNISHED WITH A
SATISFACTORY OPINION OF COUNSEL FOR HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
REGISTRATION REQUIREMENTS OF THE ACT, AND FROM ANY REGISTRATION OR QUALIFICATION
REQUIREMENTS OF ALL APPLICABLE STATE SECURITIES LAWS.
PLEASE KEEP THIS NOTE IN A SAFE PLACE.
THIS NOTE MUST BE RETURNED TO MAKER WHEN PAID IN FULL.
LASER-PACIFIC MEDIA CORPORATION
SHORT-TERM INSTALLMENT (FIXED RATE) LINE OF CREDIT NOTE, SERIES 1997
July ___, 1997 Los Angeles, California
$1,000,000.00
LASER-PACIFIC MEDIA CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware ("Maker"), for value received, hereby
promises to pay ALAN PICK, an individual, as trustee for 35 Lake Avenue, a
California limited partnership, under a certain Trust Indenture dated July ___,
1997, whose mailing address is 523 West Sixth Street, Suite 1134, Los Angeles,
California 90014, phone number (213) 624-1996, and fax number (213) 624-9073
("Holder"), the sum of One Million Dollars ($1,000,000.00), or so much thereof
as may be advanced and be outstanding, together with interest on the outstanding
principal balance hereof at the rate of fourteen percent (14%) per annum from
the date hereof until the principal balance hereof is paid in full. Maker shall
pay to Holder all accrued interest on September 30, 1997, December 31, 1997,
January 30, 1998, February 28, 1998 and March 30, 1998 (each, a "Payment Date").
Maker shall pay the outstanding principal balance hereof in three equal
installments on January 30, 1998, February 28, 1998 and March 30, 1998. The
entire unpaid principal balance hereof, together with all accrued and unpaid
interest thereon and any other amounts not otherwise due earlier hereunder,
shall be all due and payable no later than March 30, 1998. All payments made by
Maker hereunder shall be made to Holder in whose name this Note is registered
in Maker's records at the close of business on the date next preceding the date
on which such payment is made.Concurrently herewith, Maker has reimbursed Holder
for the reasonable attorneys' fees and costs of reviewing, negotiating and
preparing this Note and the related security and other agreements, including all
reasonable attorney fees, together with all costs of title insurance,
recordation, and all other closing costs (collectively, "Costs"). Costs shall
also include all reasonable costs and expenses incurred by Holder in enforcing
this Note after any Default (or any event which, with the giving of notice or
the passage of time, or both, would constitute a Default). Said amount shall not
be interpreted or deemed interest. Notwithstanding the foregoing, in no event
shall the aggregate amount of the attorneys fees reimbursable in connection with
the initial negotiation and preparation of (i) this Note, (ii) any of the
Company's other Short-Term Installment (Fixed Rate) Line of Credit Notes, Series
1997 issued concurrently herewith (collectively, the "Other Notes"), and (iii)
all of the other documents, instruments and agreements entered into in
connection with this Note or the Other Notes, exceed the sum of $5,000.00 in the
aggregate.
MAKER'S INITIALS_____
<PAGE>
The loan evidenced by this Note shall be disbursed to the Company in one or
more advances made on or before September 30, 1997. Each such advance shall be
made at the request of the Company and, when aggregated with all advances then
concurrently made under the Other Notes, shall be in an aggregate principal
amount of not less than Fifty Thousand Dollars ($50,000.00). The Company shall
provide Holder with written notice of each request for an advance at least two
(2) business days (as defined below) prior to the date of such advance.
Interest shall be computed on the basis of a three hundred sixty-five (365)
day year on the unpaid principal balance for actual days elapsed. Interest not
paid when due shall bear interest at the same rate as principal. All payments
hereunder shall first be credited to any Costs due, including reasonable
attorneys' fees, then to all accrued interest, and then to principal. This Note
may be prepaid at the discretion of Maker in part or in full at any time, and
from time to time, without any penalty or premium.
If any Payment Date falls on a day that is not a business day, the payment
due on such Payment Date will be made on the following day that is a business
day as if it were made on the date such payment were due, and no interest shall
accrue on the amount so payable for the period from and after such respective
Payment Date through and including the next succeeding business day.
Subject to Holder giving Maker thirty (30) days prior notice to cure and in
the event such cure is not completed within said notice period, Holder shall be
entitled to declare this Note in default ("Default") and to exercise any
remedies as herein, by "Law" (as defined below) or otherwise, provided, upon any
of the following events:
(i) any failure, refusal, neglect or omission to perform any material
obligation due under this Note;
(ii) any act of fraud or misrepresentation by Maker which may have a
material adverse effect on Maker's performance of its obligations
under this Note;
(iii) the commencement of any bankruptcy, reorganization, dissolution
or other insolvency proceedings by or against Maker, and if commenced
against Maker and the same not be dismissed within thirty (30) days
thereof;
(iv) the making of any assignment for the benefit of Maker's
creditors;
(v) the levy of any writ of attachment, possession, execution or other
similar writ or judicial action, or foreclosure proceeding upon the
assets of Maker, which may have a material adverse affect on Maker's
performance of its obligations under this Note or under any related
security or other agreements, and such is not released or satisfied
within thirty (30) days thereafter;
(vi) the appointment of a receiver, trustee or similar person in any
proceeding or action to which such a party is subject, with authority
to take possession or control of the assets of Maker, which
appointment may have a material adverse affect on Maker's performance
of its obligations under this Note or under any related security or
other agreements, and the same is not removed within thirty (30) days
thereafter;
(vii) if there is any change in the senior executive management of
Maker without prior written consent of Holder; or
(viii) if there is any material default (beyond the expiration of all
applicable notice and cure periods) under (i) any of the related
security or other agreements entered into in connection with or
pursuant to this Note, or (ii) the Loan and Security Agreement dated
as of August 3, 1992 by and between The CIT Group/Credit Finance, Inc.
and Maker, as amended.
Maker shall promptly give Holder notice of, and upon, the happening of
any of the foregoing events promptly after Maker learns of the
occurrence thereof.
This Note is secured by a certain Stock Pledge Agreement and certain
Trust Deed, each dated as of the date hereof. No provision of such security
agreements shall alter or impair the obligation of Maker, which is absolute and
unconditional, to pay the principal of, all other costs, if any, and interest
due under this Note at the times, place, rate, and manner as herein prescribed.
<PAGE>
Except as herein otherwise provided, Maker, and each guarantor,
endorser, surety, and each person or entity liable or to become liable on this
Note (collectively "Guarantors"), hereby waives, to the fullest extent permitted
by Law, presentment, demand, protest, notice of dishonor, nonpayment, default
and all other notices (except as explicitly required to be given hereby), all
rights of subrogation against Maker or any Guarantor; the right, if any, to the
benefit of, or to direct the application of, any securities hypothecated to
Holder (including the possible loss of all subrogation rights and remedies);
the right to require Holder to proceed against Maker or any one or more of
Guarantors, to proceed against any one or more of the securities hypothecated to
Holder, or to pursue any other remedy of Holder; and to the fullest extent
permitted by Law, all statutes of limitation and any other similar limitations,
restrictions and defenses. Maker and each Guarantor further agrees that Holder
may proceed against any one or more of Maker, the Guarantors and/or any of the
securities hypothecated to Holder without proceeding against any of the others.
Maker and each Guarantor also agrees that the cessation of the liability of any
one or more of Maker, the Guarantors or securities hypothecated to Holder for
any reason other than full payment, that any revision, renewal, extension,
forbearance, change of rate of interest, or acceptance, release or substitution
of Maker, any Guarantors or securities hypothecated to Holder, or any impairment
or suspension of any of Holder's remedies or rights against any one or more of
Maker, Guarantors, or the securities hypothecated to Holder, shall not in any
way affect the liability of any of the parties hereto, except the Maker or
respective Guarantor shall be entitled to receive credit for any and all
payments made to Holder of, and pursuant to, this Note. Further, Maker and each
Guarantor hereby waives to the full extent permitted by Law all current and
future statutory (including the provisions of California Civil Code Sections
2787 et. seq. and all other similar and successor statutes), common, and case
law limitations, restrictions and defenses on the enforceability of any joint,
several, surety and similar liability hereunder.
In the event that this Note or any related instrument, agreement or
transaction does not fully comply with all applicable usury laws, any interest
or other fee payable under this Note or under any other related agreement or
instrument shall be subject to a reduction to an amount not in excess of any
applicable maximum non-usurious amount allowed under the usury laws as now or
hereafter determined to be applicable. In the event any interest does exceed the
maximum legal rate, it shall be deemed a mistake, and such excess shall be
automatically canceled and if theretofore paid, the same shall be credited to
the principal amount due under this Note or if this Note has been paid in full,
returned to Maker, upon the request of Maker.
Except as herein explicitly provided, Holder shall not be deemed to have
waived any of its rights under this Note unless such waiver is in writing and
signed by Holder. No delay or omission on the part of Holder in exercising any
right shall operate as a waiver thereof or of any other right. A waiver upon any
one occasion shall not be construed as a bar or a waiver of any right or remedy
to any future occasion nor shall it establish a custom or course of dealing.
This Note may not be changed, modified, amended or terminated orally. All
such modifications shall be in writing executed by Maker and Holder to be
effective and binding on them.
No stockholder, director, officer, employee, incorporator or professional
advisor, past, present or future, of Maker or any successor corporation or other
entity shall have any liability for any obligations of Maker under this Note or
any of the other related agreements, or for any claim based on, in respect of or
by reason of, such obligations or their creation. Holder, by accepting this
Note, waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
This Note, together with the Trust Indenture, the Stock Pledge Agreement,
the Trust Deed, the Warrants and the other related agreements and instruments,
together with all exhibits, schedules or other attachments thereto (collectively
and each of them "Agreements"), are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Note, together with the other Agreements shall
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
The parties agree that any disputes concerning this Note shall be
litigated, whether by a court or by arbitration, only within the County of Los
Angeles, California, which the parties agree for jurisdictional purposes is
the place where this Note has been entered into and where it will be
substantially performed. In the event any party institutes any legal action to
collect or otherwise enforce any provision of this Note, the prevailing party
shall be entitled to reasonable attorney fees and costs.
<PAGE>
This Note shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of the State of California, without
giving effect to any conflict of laws principles, except as preempted or
otherwise controlled by any applicable Federal Law, in which case such Federal
Law shall apply. Unless explicitly subsequently otherwise provided in writing,
any conflict between this Note, any other agreement or instrument, or contrary
conduct shall be resolved in favor first of perfecting and maintaining all
security interests, then all security agreements, and then this Note, with each
specific provision having control over any general or other provision.
It is the intention and agreement of the parties hereto that this Note be
legally binding and enforceable and in compliance with all applicable Laws. To
the extent that any provision of this Note is declared unenforceable, ambiguous,
severable, contradictory or otherwise deficient, and to the extent it is
commercially reasonable, said provision and this Note shall be deemed amended
with such terms and conditions as to effect and enforce the intentions and
general terms and conditions of this Note.
Except as herein otherwise provided, all remedies as may be provided herein
or by Law shall be nonexclusive and cumulative, and the exercise of one shall
not be deemed a waiver of any other remedy. Except as otherwise provided, this
Note shall bind and inure to the benefit and obligation of the successors,
assigns, representatives and heirs of each party. The failure of any or all
parties to initial each or any page or to fill in any blanks of this Note shall
not in any way affect its enforceability or validity.
As used herein, certain capitalized and other words shall have the meaning as
herein provided, including the following definitions, or any variation thereof.
Any conflict between said capitalized and other words and any other meanings
shall be resolved first as herein provided, and if not so provided then in the
other Agreements. As used herein, the term "Claim(s)" shall be deemed to include
all claims (including all rights of subrogation), disputes, liabilities, debts,
obligations, losses, damages (including all actual, general, compensatory,
consequential, incidental, special, punitive or otherwise), rights of
subrogation, actions, judgments, orders, fines, penalties, forfeitures, liens,
other encumbrances, costs (including all investigation and remedial costs),
other charges, expenses (including all attorneys' fees and costs), and/or any
similar items, whether known, unknown, foreseeable, unforeseeable, absolute,
contingent, liquidated, non-liquidated, direct, indirect, derivative,
compensatory, consequential, punitive or otherwise. As used herein, a "day" is a
calendar day and a "business day" is a calendar day other than a Saturday or
Sunday upon which the Office of the County Recorder of Los Angeles County is
open and accepting documents for recording and the state and federal commercial
banks are generally open for business in Los Angeles County. If provided herein
that a party must act by a particular time, or an act is effective only if done
by a particular time, and the last date for the doing or effectiveness of such
act falls upon a day other than a business day, the time for the doing or
effectiveness of such act shall be extended to the next succeeding business day.
As used herein, the term "herein", or any variation thereof, shall mean any
where within this Note or otherwise applicable within a particular section of
this Note. As used herein, the term "including", or any variation thereof, shall
be construed as if followed by the phrase "without any limitation". As used
herein, the term "Law" shall be deemed to mean all applicable (except as
otherwise herein excluded) statutory, regulatory, administrative, common, at
equity and decisional laws, regulations, ordinances, rules, directives, orders,
judgments, decrees, writs, decisions and other judicial determinations
reasonably affecting this Note, any related security or other agreement or
instrument, or any contemplated transaction, whether imposed byfederal, state,
county, municipal or other governmental or quasi-governmental authority. As used
herein, "person" or any variation thereof shall mean any person, trust,
corporation, partnership, limited liability company, other entity or
governmental or quasi-governmental agency or body. As used herein, the term
"release" shall include the explicit waiver of California Civil Code Section
1542 which states that, "A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
this release, which if known by him must have materially affected his settlement
with debtor," and all other similar and successor statutory, common and case law
rights, defenses and limitations upon the scope of such release or waiver. As
used herein, the term a party's "Representative(s)" shall be deemed to include,
unless otherwise provided or not applicable, the respective party's spouse,
heirs, executors, administrators, beneficiaries, trustees, receivers, assigns,
successors, owners, investors, partners, parent companies, subsidiaries,
shareholders, directors, officers, employees, servants, representatives, agents,
affiliates, professional advisors, and any other similar or related persons or
entities, and each of their respective Representatives.
All notices and demands, all responses thereto and any other instruments of
any kind (collectively "Notices"), which any party may require, or desires, to
be provided or served on any party shall be written, dated, state its purpose
and the time during which to respond, and served on the respective parties at
the addresses set forth herein or as may otherwise be directed in writing.
<PAGE>
Service shall be deemed made, and received, if personally, at the time of such
service: if by certified or registered mail, within three (3) business days
after deposited in the United States mail within the state of California, or
within five (5) business days after deposited in the United States mail outside
of the state of California, provided postage is prepaid and the Notice is
properly addressed; if by courier or overnight service (such as Federal Express,
DHL or UPS), at the time agency confirms delivery; and if by telegraph,
telefacsimile, telex, at the time the machine or agency confirms delivery,
provided that within two (2) business days thereafter the original thereof shall
have been sent by mail (as herein provided) to the party to whom such Notice was
directed. All Notices shall be deemed deposited for mail purposes as of the date
of its postmark. Refusal of acceptance of any Notice served in accordance
herewith shall not affect the service thereof as otherwise provided herein.
Each party hereto shall promptly give notice to each other party of any change
of its address or number. If such change notice is not served, the notifying
party(s) shall be entitled to rely upon the address and numbers herein last
provided.
<PAGE>
IN WITNESS WHEREOF, Maker has caused this instrument to be duly executed,
manually or in facsimile, and a facsimile of its corporate seal to be imprinted
hereon.
EXECUTION INSTRUCTIONS. Please review and if fully satisfied, please initial the
bottom of each page, sign below and affix the Corporate Seal in the space
provided below.
CORPORATE SEAL LASER-PACIFIC MEDIA CORPORATION,
(place below) a Delaware corporation
By:_______________________________________
Print Name:_______________________________
Print Title:______________________________
809 N. Cahuenga Blvd.
Hollywood, CA 90038
Phone No:(213) 960-2180
Fax No: (213) 960-2192
Fed I.D. Tax No.: 95-382-4617
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (COLLECTIVELY "ACT"), OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE
STATE SECURITIES LAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THIS WARRANT MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR HOLDER THAT SUCH TRANSFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF REGISTRATION REQUIREMENTS OF THE ACT, AND FROM ANY REGISTRATION OR
QUALIFICATION REQUIREMENTS OF ALL APPLICABLE STATE SECURITIES LAWS.
LASER-PACIFIC MEDIA CORPORATION
WARRANT TO PURCHASE 250,000 SHARES
OF THE COMMON STOCK OF
LASER-PACIFIC MEDIA CORPORATION
Dated: July ___, 1997
THIS CERTIFIES THAT, for value received, 35 LAKE AVENUE, a California
limited partnership ("Holder"), is entitled to subscribe for and purchase,
subject to the provisions of this Warrant, from LASER-PACIFIC MEDIA CORPORATION,
a Delaware corporation (the "Company"), 250,000 (subject to adjustment pursuant
to Section 4 hereof) fully paid and non-assessable shares of the Common Stock of
the Company ("Warrant Shares") at the price of One Dollar ($1.00) per Share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Common Stock" shall mean the Company's
authorized common stock, and any stock into or for which such Common Stock may
hereafter be converted or exchanged, (b) the term "Grant Date" shall mean the
date first above written, and (c) the term "Other Warrants" shall mean any
warrant issued upon transfer or partial exercise of this Warrant. The term
"Warrant" as used herein shall be deemed to include Other Warrants unless the
context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time up to and terminating on
a date two (2) years from the date of the Grant Date ("Expiration Date").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, the purchase right represented by this Warrant may be exercised at any
time up to the Expiration Date by the Holder, in whole or in part, at the
election of the Holder, by the surrender of this Warrant (with the notice of
exercise substantially in the form attached hereto as Exhibit "A" duly completed
and executed) at the principal office of the Company and by the payment to the
Company, by cashier's check or by wire transfer to an account designated by the
Company of an amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares being purchased. The person or persons in whose
name(s) any certificate(s) representing shares of Common Stock shall be issuable
upon exercise of this Warrant shall be deemed to have become the holder(s) of
record of, and shall be treated for all purposes as the record holder(s) of, the
shares represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised in accordance with the provisions of this Warrant. In the
event of any such exercise of the rights represented by this Warrant,
certificates for the Warrant Shares so purchased shall be delivered to the
holder hereof as soon as possible and in any event within thirty (30) days after
such exercise.
3. Stock Fully Paid; Reservation of Shares. All shares of Common Stock that
may be issued upon the exercise of the rights represented by this Warrant shall,
upon issuance pursuant to the terms and conditions herein, be fully paid and
non-assessable, and free from all liens and charges with respect to the issue
thereof. During the period within which the rights represented by this Warrant
may be exercised, the Company shall at all times have authorized, and reserved
for the purpose of issuance upon exercise of the purchase rights evidenced by
this Warrant, a sufficient number of shares of its Common Stock to provide for
the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The
Exercise Price and the number of Warrant Shares issuable upon the exercise of
<PAGE>
this Warrant are subject to adjustment from time to time upon the occurrence of
the events enumerated in this Section 4.
In the event that the outstanding shares of Common Stock subject to this
Warrant are changed into or exchanged for a different number or kind of shares
or other securities by reason of merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares, an
appropriate and equitable adjustment shall be made in the number and kind of
shares as to which this Warrant, or portions hereof then unexercised, shall be
exercisable, to the end that after such event the Holder's proportionate
interest shall be maintained as immediately before the occurrence of such event.
Such adjustment shall be made without change in the total price applicable to
this Warrant or the unexercised portion hereof (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices) and
with any necessary corresponding adjustment in Warrant Price per Warrant Share.
5. Fractional Shares. No fractional shares of Common Stock shall be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value
of the Common Stock on the date of exercise as reasonably determined in good
faith by the Company's Board of Directors.
6. Deemed Representations and Covenants of Holder.
(a) By acceptance of this Warrant, Holder represents and warrants to
the Company that it is acquiring the Warrant, and shall acquire the Warrant
Shares, for investment, for its own account and not with a view towards the
resale or distribution thereof.
(b) By acceptance of this Warrant, Holder hereby agrees that it shall
not sell, transfer by any means or otherwise dispose of the Warrant or the
Warrant Shares acquired by it without registration under the Securities Act of
1933, as amended, and all applicable regulations promulgated thereunder (the
"Federal Act"), and under any applicable state securities laws and all
applicable regulations promulgated thereunder ("State Acts"), unless (i)
exemptions from registration under the Federal Act and all applicable State Acts
are available thereunder, and (ii) Holder has furnished the Company with notice
of such proposed transfer and an opinion of Holder's legal counsel, which
counsel and opinion is reasonably acceptable to the Company, that such proposed
sale or transfer is so exempt.
(c) By acceptance of this Warrant, Holder acknowledges that:
(i) Holder must bear the economic risk of the investment proposed
herein for an indefinite period of time because the Warrant Shares will not have
been registered under the Act and cannot be sold by Holder unless they are
registered under the Act or an exemption therefrom is available thereunder.
(ii) Holder has had both the opportunity to ask questions of and
receive answers from the officers and directors of the Company and all persons
acting on its behalf concerning the Warrant, the Warrant Shares and the terms
and conditions hereof and to obtain any additional information, to the extent
the Company possesses or may possess such information or can acquire it without
unreasonable effort or expense, necessary for Holder to make the investment in
the Company contemplated hereby.
(iii) The Company shall place stop transfer orders with its
transfer agent against the transfer of the Warrant and the Warrant Shares in the
absence of registration under the Act or an exemption therefrom thereunder as
provided herein.
7. Rights as Shareholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of any
Warrant Shares or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
receive any distribution of any nature in respect of any Warrant Shares until
this Warrant shall have been exercised and the Warrant Shares purchasable upon
the exercise hereof shall have become deliverable, as provided herein.
8. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9. Notices. All notices and demands, all responses thereto and any other
instruments of any kind (collectively "Notices"), which any party may require,
or desires, to be provided or served on any party shall be written, dated, state
its purpose and the time during which to respond, and served on the respective
<PAGE>
parties at the addresses set forth on the signature pages hereto or as may
otherwise be directed in writing. Service shall be deemed made, and received, if
personally, at the time of such service: if by certified or registered mail,
within three (3) business days after deposited in the United States mail within
the state of California, or within five (5) business days after deposited in the
United States mail outside of the state of California, provided postage is
prepaid and the Notice is properly addressed; if by courier or overnight service
(such as Federal Express, DHL or UPS), at the time the agency confirms delivery;
and if by telegraph, telefacsimile or telex, at the time the machine or agency
confirms delivery, provided that within two (2) business days thereafter the
original thereof shall have been sent by mail (as herein provided) to the party
to whom such Notice was directed. All Notices shall be deemed deposited for mail
purposes as of the date of its postmark. Refusal of acceptance of any Notice
served in accordance herewith shall not affect the service thereof as otherwise
provided herein. Each party hereto shall promptly give notice to each other
party of any change of its address or number. If such change notice is not
served, the notifying party(s) shall be entitled to rely upon the address and
numbers herein last provided.
10. Binding Effect on Successors. This Warrant shall be binding upon Holder
and upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Warrant Shares issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of all permitted successors and assigns of
the Holder. The Company shall, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of Holder, at the Company's expense,
acknowledge in writing its continuing obligation to Holder in respect of any
rights (including any right to registration of the Warrant Shares) to which
Holder shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of Holder to make any
such request shall not affect the continuing obligation of the Company to Holder
in respect of such rights.
11. Lost Warrants or Stock Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of this Warrant, the Company shall make and deliver a replacement Warrant in
lieu of the lost, stolen, destroyed or mutilated Warrant.
12. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, except as preempted or otherwise controlled by any
applicable Federal Law in which case such Federal Law shall apply.
14. Jurisdiction and Venue. The parties agree that any disputes concerning
this Warrant shall be litigated, whether by a court or by arbitration, only
within the County of Los Angeles, California, which the parties agree for
jurisdictional purposes is the place where this Warrant has been entered into
and where it will be substantially performed. In the event any party institutes
any legal action to collect or otherwise enforce any provision of this Warrant,
the prevailing party shall be entitled to reasonable attorney fees and costs.
15. Entire Agreement; Modification. This Warrant together with the
Company's Short-Term Installment (Fixed Rate) Line of Credit Note issued to
Holder concurrently herewith, and all exhibits, schedules or other attachments
thereto (collectively, "Documents"), is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Warrant, together with the
other Documents, supersedes all prior agreements and understandings between the
parties with respect to such subject matter and shall constitute the final and
binding agreement of the parties with respect to such subject matter, except as
otherwise explicitly provided herein. It is the intent of the parties that this
Warrant and the Warrant Shares fully comply with all applicable laws. To the
<PAGE>
extent that this Warrant or any Warrant Shares do not comply, the Company shall
be entitled to modify this Warrant and the Warrant Shares in order that the same
complies with such applicable laws and Holder shall comply therewith.
LASER-PACIFIC MEDIA CORPORATION,
a Delaware corporation
By:____________________________________
Its:_____________________________
809 North Cahuenga Avenue
Los Angeles, CA 90038
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: Laser-Pacific Media Corporation
1. The undersigned hereby elects to purchase ______ (____) shares of Common
Stock of Laser-Pacific Media Corporation pursuant to the terms of the attached
Warrant dated ___________, 1997, and tenders herewith payment of the purchase
price of such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
Print Name:_________________________________
Undersigned Status (check one as appropriate):
( ) A married person
( ) Husband and wife as community property
( ) As sole and separate person
( ) As tenants-in-common
( ) As joint tenants with rights of survivorship
( ) a general partnership established and maintained in good
standing upon the laws of _______________________________.
( ) a limited partnership established and maintained in good
standing upon the laws of____________________________ with
_______________, a __________________ as the general partner.
( ) a limited liability company established and maintained in
good standing upon the laws of _________________________ with
___________________, a ______________________ as the manager.
( ) a corporation established and maintained in good standing upon
the laws of _______________________________.
( ) a trust established and maintained in good standing upon the
laws of ________________________ with _____________________,
a _________________________ as trustee.
( ) a _____________________________________ established and
maintained in good standing upon the laws of ________________.
Print Address:___________________________________________
___________________________________________
Phone No: (___)_______________
Fax No: (___)_______________
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, except as in
compliance with applicable securities laws.
Execution Date:_____________, 199__
By: ___________________________________________
Print Name: ___________________________________________
Print Title: ___________________________________________
Print Address: ___________________________________________
___________________________________________
Phone No: (___)_______________
Fax No: (___)_______________
Social Security or Federal Tax I.D. No.___________________
Recording requested by:
When Recorded Mail to:
Alan Pick, Trustee
c/o Joel M. Kantor, Esq.
1990 S. Bundy Drive, Suite 600
Los Angeles, CA 90025
Phone: (310) 442-5308
Fax: (310) 207-9762
DEED OF TRUST
WITH ASSIGNMENT OF RENTS AND REQUEST FOR SPECIAL NOTICE
Dated: July ___, 1997
THIS DEED OF TRUST ("Trust Deed") dated above for reference purposes only
is made by and between PACIFIC VIDEO, INC., a Delaware Corporation, herein
called "Trustor", COMMONWEALTH LAND TITLE COMPANY, a California corporation,
herein called "Trustee", and Alan Pick as Trustee under a certain Trust
Indenture dated July ___, 1997 made for the benefit of the holders of the Series
1997 Short-Term Installment Line of Credit Notes (collectively "Notes") dated
July ___, 1997, made by Laser-Pacific Media Corporation, a Delaware corporation,
whose address is 523 West Sixth Street, Suite 1134, Los Angeles, California
90014, phone number (213) 624-1996 and fax number (213) 624-9073 herein called
"Beneficiary."
WITNESSETH: That Trustor grants to Trustee in trust, with power of sale,
that property in the City of Hollywood, County of Los Angeles, State of
California, commonly referred to for reference purposes only as 823 - 835 North
Seward Street, Hollywood, California, Assessor's Parcel Numbers 5533-24 - 2, 3,
and 4 and as legally described in the attached Exhibit "A" ("Property") together
with the rents, issues and profits thereof, subject, however, to the right,
power and authority hereinafter given to and conferred upon Beneficiary to
collect and apply such rents, issues and profits and for the purpose of securing
(1) the performance of all obligations of Laser-Pacific Media Corporation, a
Delaware corporation ("Maker") under the Notes, and all extensions, renewals and
modifications thereof; (2) the performance of each agreement of Trust or
incorporated by reference or contained herein; and (3) payment of additional
sums and interest thereon which may hereafter be loaned or otherwise advanced to
Maker, or any of each of its successors-in-interest, when evidenced by a
promissory note(s) or other agreement(s) reciting that they are secured by this
Trust Deed (collectively all the foregoing and each of them ("Agreements").
To protect the security of this Trust Deed and with respect to the Property
above described, Trustor expressly makes each and all of the agreements, and
adopts and agrees to perform and be bound by each and all of the terms and
provisions contained in subdivisions A and B of that certain fictitious deed of
trust recorded in Los Angeles County on October 30, 1961, in the book T2055 and
at the page 899 of the Official Records in the office of the county recorder of
the county where said property is located, which terms and provisions shall
inure to and bind the parties hereto with respect to the Trust Property.
Said agreement, terms and provisions contained in said subdivision A and B are,
by the within reference thereto, incorporated herein and made a part of this
Deed of Trust for all purposes as fully as if set forth at length.
Said fictitious deed of trust is hereby supplemented and modified as herein
provided. Any conflict between such fictitious deed of trust and the following
shall be resolved in favor of the following provisions:
1. Notwithstanding the foregoing, Trustor absolutely and irrevocably assigns to
the Trustee, in trust, all income, rents, issues, cash collateral, revenues,
royalties, benefits and profits of the Trust Property from time to time
accruing, including, without limitation, all payments under Leases or tenancies,
proceeds of insurance, tenant security deposits and escrow funds (collectively,
the "Rents"). The foregoing assignment is intended to be and is an absolute,
present, unconditional assignment from Trustor to Trustee and is not intended
and does not constitute either additional security or the passage of a security
interest; provided, however, that Trustor shall have a license (hereinafter
referred to as the "License") to cause collection of the Rents as they
respectively become due, and to enforce all leases for the Trust Property, which
license may be revoked by Trustee upon the occurrence of any default hereunder
(after the expiration of all applicable notice and cure periods).
<PAGE>
2. Trustor further irrevocably grants, transfers and assigns to Trustee in
trust, with power of sale, all right, title, interest and estate of Trustor(s)
now owned, or hereafter acquired, in and to the Property and the following
property, rights, interests and estates (collectively "Trust Property"):
a. All easements, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers,
air rights, subdivision, development, building and other rights, applications
and permits and other related contractual and other rights; all improvements,
buildings, other structures and related items, including all wells, septic
systems, irrigation systems, drainage systems, utility systems, security
systems, all estates, rights, titles, interests, privileges, liberties,
tenements, hereditament and appurtenances of any nature whatsoever, in any way
belonging, relating or pertaining to the Property and the reversion and
reversions, remainder and remainders; all land lying in the bed of any street,
road or avenue, opened or proposed, in front of or adjoining the Property to the
center line thereof; and all the estates, rights, titles, interests, dower and
rights of dower, curtesy and rights of curtesy, property, possession, claim and
demand whatsoever, both in law and in equity, of Trustor, or in which Trustor
has or shall have an interest now or hereafter, in and to the Trust Property and
every part and parcel thereof, with the appurtenances thereto;
b. All affixed machinery, equipment and fixtures such as all heating, air
conditioning, plumbing, lighting, other utility, security, irrigation,
communications and elevator systems at, about or upon the Property, or
appurtenant thereto, and usable in connection with the present or future
operation and occupancy of the Property (but exclusive of any machinery,
equipment and fixtures used in Trustor's business and not customarily considered
part of the Property);
c. All awards or payments, including interest thereon, which may heretofore
and hereafter be made with respect to the Property, whether from the exercise of
the right of eminent domain (including any transfer made in lieu of or in
anticipation of the exercise of said right), or for a change of grade or for any
other injury to or decrease in the value of the Trust Property;
d. All leases and other agreements affecting the use, enjoyment or
occupancy of the Trust Property heretofore or hereafter entered into, or
assigned, conveyed or transferred to Trustor ("Leases"), and all oil and gas or
other mineral royalties, bonuses and rents, issues and profits from the Trust
Property ("Rents") and all proceeds from the sale or other disposition of the
Leases or the Rents and the right to receive and apply the Rents to the payment
of the amounts secured hereby;
e. All proceeds of, and all unearned premiums due from, all insurance
policies covering the Trust Property, including, without limitation, the right
to receive and apply the proceeds of any insurance, judgments, or settlements
made in lieu thereof, for damage to the Trust Property; and
f. All architectural and engineering drawings, plans and specifications;
contractor, subcontractor, laborer, material and all other similar agreements;
governmental applications, registrations, petitions, approval, permits,
certificates, payments and deposits and all other similar items, instruments and
documents relating to the Property and the development thereof.
3. The Trust Deed shall also secure each of the following:
a. All advances made and expenses incurred, including all reasonable
attorneys' fees to cure any breaches, defaults or events of default (in each
case, only after the expiration of all notice and cure periods) under any senior
or junior loans, trust deeds, mortgages, and/or other security instruments;
b. All advances made and expenses incurred, including all reasonable
attorneys' fees, to preserve, repair or maintain the Trust Property or any
interest therein; and
c. All late charges, prepayment penalties and all other similar items due
under this Trust Deed, and any of the other Agreements.
4. Beneficiary shall be named as additional insured under all policies of
insurance insuring the Trust Property or any part thereof ("Policies"), and
Trustor shall promptly deliver to Beneficiary a certificate of insurance
coverage in accordance herewith. All Policies shall be issued by an insurer
reasonably acceptable to Beneficiary and duly qualified to do business within
the State of California, and shall contain the standard mortgagee non-
contribution clause and a provision for thirty (30) day prior written notice
to Beneficiary of the cancellation, modification or expiration of any such
Policies. No later than fifteen (15) days prior to the expiration date of each
of the Policies, Trustor shall deliver to Beneficiary satisfactory evidence of
the renewal of each of the Policies.
<PAGE>
5. This Trust Deed is both a real property mortgage and a "security agreement"
within the meaning of the California Uniform Commercial Code. The Trust Property
includes both real and personal property and all other rights and interest,
whether tangible or intangible in nature, of Trustor in or to the Trust
Property. Subject to the rights of any senior lienholders, Trustor by executing
and delivering this Trust Deed has granted to Beneficiary and Trustee, as
security for the amounts secured hereby, a security interest in the Trust
Property. In the event any breach, default or event of default, allowing
Beneficiary or Trustee to foreclose against any of the Trust Property, should
occur under any of the Agreements, Beneficiary and Trustee, in addition to any
other rights and remedies which they may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the California Uniform Commercial Code,
including, without limiting the generality of the foregoing, the right to take
possession of the Trust Property or any part thereof, and to take such other
measures as Beneficiary may deem necessary for the care, protection and
preservation of the Trust Property. Upon request or demand of Beneficiary,
Trustor shall at its expense assemble the Trust Property and make it available
to Beneficiary and Trustee at a convenient place acceptable to Beneficiary.
Trustor shall pay to Beneficiary and Trustee on demand any and all expenses,
including all reasonable attorneys' fees and costs, incurred or paid by
Beneficiary or Trustee in protecting its interest in the Trust Property and in
enforcing the rights hereunder with respect to the Trust Property. Any notice of
sale, disposition or other intended action by Beneficiary or Trustee with
respect to the Trust Property sent to any Trustor in accordance with the
provisions hereof at least ten (10) days prior to such action, shall constitute
commercially reasonable notice to Trustor. The proceeds of any disposition of
the Trust Property, or any part thereof, after a breach, default or event of
default hereunder may be applied by Beneficiary to the payment of the amounts
secured hereby in such priority as Beneficiary in its discretion shall deem
proper. Concurrently herewith, Trustor shall execute and cause to be filed one
or more UCC-1 financing statements with all governmental agencies necessary to
perfect Beneficiary's security interest in the Trust Property (to the extent
such security interest may be perfected by the filing of a UCC-1 financing
statement). Trustor shall continue to maintain or cause to be maintained all
such UCC-1 financing statements. Trustor shall advise Trustee and Beneficiary of
any addition, change, transfer, sale, or other disposition, including any change
of address or entity, (collectively and each of them "Transfer") of any of the
Trust Property prior to any such Transfer and shall within ten (10) days after
the Transfer record an amendment to the UCC-1, a UCC-2, or as otherwise required
by applicable law, to perfect Beneficiary's interest in the proceeds and the
items acquired therewith. Nothing herein is meant to approve of or consent to
any such Transfer. In the alternative to the foregoing, and without any
liability to Trustor or waiver of any right, remedy or other Claim, Trustor
hereby appoints Beneficiary and Trustee, acting alone or in concert with each
other, as its sole and exclusive attorney-in-fact with full power of nomination
and substitution at Beneficiary's personal discretion to execute and cause to be
recorded the UCC-1, UCC-2 and all other documents necessary in Beneficiary's
opinion to perfect and maintain the security interests hereby created. PLEASE
NOTE, ALL UCC FINANCING STATEMENTS MUST BE CONTINUED EVERY FIVE (5) YEARS BY
FILING A UCC-2 WITHIN SIX (6) MONTHS PRIOR TO EACH FIVE (5) YEAR EXPIRATION
PERIOD, AND BEFORE FORECLOSING, PLEASE REVIEW CALIFORNIA COMMERCIAL CODE SECTION
9501(4).
6. Trustor shall protect, reimburse, defend (by an attorney reasonably
acceptable to Beneficiary), indemnify and save harmless Beneficiary, Trustee and
each of their Representatives from and against all Claims imposed upon, suffered
by, incurred by, or asserted against, Beneficiary, Trustee and/or any of their
Representatives and arising from any state of facts or circumstances existing
prior to Beneficiary acquiring title to the Property through foreclosure, a deed
in lieu of foreclosure or otherwise or receipt of any Rents, including as a
result of (a) any accident, injury to or death of persons or loss of or damage
to property occurring in, on or about the Trust Property or any part thereof or
on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways: (b) any use, non-use or condition in, on or about the Trust
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (c) any failure on the part
of Trustor to perform or comply with any of the terms of this Trust Deed; (d)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Trust Property or any part thereof; (e) the failure
of any person to file timely with the Internal Revenue Service an accurate Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter
Exchange Transactions, which may be required in connection with this Trust Deed,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which the Trust Deed Loan is made; (f) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Materials (hereinafter defined)
on, from, or affecting the Trust Property or any other property; (g) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (h) any investigation or
lawsuit brought or threatened, settlement reached, or government order relating
<PAGE>
to such Hazardous Materials; or (i) any violation of Laws, which are based upon
or in any way related to such Hazardous Materials. With respect to any related
Hazardous Materials matter, the costs Trustor are required to reimburse shall
include all reasonable attorney and consultant fees, investigation and
laboratory fees, court costs, and litigation expenses including any and all
appeals. Notwithstanding anything to the contrary and without any waiver of any
obligation, right or benefit hereto, Beneficiary, at all times, shall have the
right to fully participate in the defense of each related indemnity Claim and,
in the event Trustor fails to assume the defense of any such Claim within a
reasonable time after Beneficiary's demand therefor or fails to provide
reasonably adequate security to secure the full and timely performance and
payment of Trustor's indemnification obligations hereunder, the right to right
to compromise or settle any indemnity Claim. In the event of such a settlement
or compromise, Beneficiary shall not be entitled to any greater rights or
remedies than Beneficiary would have obtained from Trustor hereunder had it not
settled or compromised such Claim. Trustor shall at all times keep Beneficiary
fully informed of all material information, status and problems relating to each
respective indemnity Claim. Any amounts payable to Beneficiary, Trustee and each
of their Representatives by reason of the application of this paragraph shall be
secured by this Trust Deed and shall become immediately due and payable and
shall bear interest at the maximum rate then permitted by law from the date loss
or damage is sustained by Beneficiary, Trustee and/or any of their
Representatives until paid. The obligations of Trustor under this paragraph
shall be personal and shall survive any termination, satisfaction, assignment,
judgment of foreclosure or delivery of a deed in lieu of foreclosure of this
Trust Deed. The obligations and liabilities of Trustor under this section shall
survive the foreclosure of this Trust Deed or the delivery of a deed in lieu of
foreclosure unless and until otherwise terminated by operation of law or by
written agreement of the Beneficiary.
7. Trustor hereby acknowledges and represents to Beneficiary that it is being
adequately compensated for guaranteeing the obligations of the Maker under the
Agreements.
8. Beneficiary is hereby relieved of any duty to warn or to disclose any such
facts or information to Trustor concerning any of the Agreements, or the related
transactions. Trustor assumes the obligation to keep itself informed of all
facts, circumstances, obligations, acts or omissions involving the Maker, the
Agreements and the related transactions. No partial or other disclosure or
warning by Beneficiary or any of its Representatives shall be deemed an
assumption of any such obligation and Trustor shall not be entitled to rely on
any such disclosure or warning. Trustor agrees to and shall conduct its own
independent investigation of all such matters and shall rely solely upon such
independent investigation and not upon any statement, disclosure or warning of
Beneficiary. Trustor hereby assumes the risks of keeping itself informed of the
financial condition and operations of the Maker and hereby relieves Beneficiary
and all its Representatives from all requirements of disclosure.
9. As used herein certain capitalized words shall have the meaning herein
provided and if not provided herein then as provided in the Agreements. Any
conflict between said capitalized words and any other meaning shall be resolved
as herein provided. As used herein the term "Claim(s)" shall be deemed to
include all claims (including all rights of subrogation), disputes, liabilities,
debts, obligations, losses, damages (including all actual, general,
compensatory, consequential, incidental, special, punitive or otherwise),
demands, actions, judgments, orders, fines, penalties, forfeitures, liens, other
encumbrances, costs (including all investigation and remedial costs), other
charges, expenses (including all reasonable attorneys' fees and costs), and/or
any other similar items, whether known, unknown, foreseeable, unforeseeable,
absolute, contingent, liquidated, non-liquidated, direct, indirect, derivative,
compensation, special, punitive or otherwise. As used herein, a "day" is a
calendar day and a "business day" is a calendar day other than a Saturday or
Sunday upon which the Office of the County Recorder of Los Angeles County is
open and accepting documents for recording and the state and federal commercial
banks are generally open for business. If provided herein that a party must act
by a particular time, or an act is effective only if done by a particular time,
and the last date for the doing or effectiveness of such act falls upon a day
other than a business day, the time for the doing or effectiveness of such act
shall be extended to the next succeeding business day. As used herein, the term
"Hazardous Materials" shall include gasoline, petroleum products, explosives,
radioactive materials, radon gas, hazardous materials, hazardous wastes,
hazardous or toxic substances, polychlorinated biphenyls or related or similar
materials, asbestos or any material containing asbestos, or any other substance
or material as may be defined as a hazardous, toxic or unsafe substance by any
applicable Law, including without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33
U.S.C. Section 7401 et seq.) and in the regulations adopted and publications
promulgated pursuant thereto. As used herein, the term "including", or any
<PAGE>
variation thereof, shall be construed as if followed by the phrase "without any
limitation". As used herein the term, "Law" shall be deemed to mean all laws,
statutes, regulations, rules, orders, directions, other entitlement, ordinances,
judicial decision, requirements, procedures, permits, approval, orders,
directions and guidelines whether imposed by federal, state, county, municipal
or other governmental or quasi-governmental authority. As used herein, "person"
or any variation thereof, shall mean any person, trust, corporation,
partnership, limited liability company, other entity or governmental or quasi-
governmental agency or body. As used herein the term a party's "Representative"
shall be deemed to include, unless otherwise provided or not applicable, all
owners, investors, partners, parent companies, subsidiaries, shareholders,
directors, officers, employees, servants, representatives, agents, affiliates,
associates, professional advisors, or any other similar or related persons
and/or entities and any of their respective spouses, heirs, executors,
administrators, successors, trustees, receivers, and assigns.
10. Miscellaneous. This Trust Deed shall be governed by and interpreted under
the laws of California and shall wherever possible be given a reasonable,
practical and workable interpretation so as to effect the general intentions of
the Parties. Unless otherwise explicitly provided in writing, any conflicts
between this Trust Deed and the Agreements, any other security or other related
agreements or instruments or contrary conduct shall be resolved in favor of
creating and maintaining the security interests and priority created by this
Trust Deed. Time is of the essence and, unless stated otherwise, the time
required in which to perform any act shall be ten (10) days. If Trustor consists
of more than one person or entity, the obligations and liabilities of each such
person hereunder shall be joint and several. No party shall be entitled to any
advantages due to another party's legal representation or preparation of the
Trust Deed. This Trust Deed, and any provisions hereof, shall not be modified,
amended, waived, extended, changed, discharged or terminated orally, by any act
or failure to act on the part of Trustee, Trustor or Beneficiary, or otherwise,
except only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought. Nothing contained in this Trust Deed is meant to
establish or shall be interpreted to mean that any relationship other than that
of Trustor as debtor and Beneficiary as secured party or that any Beneficiary
has or owes any Trustor any fiduciary or other relationship or duty of trust or
disclosure nor shall any such relationships or duties be established between the
Parties, except as explicitly agreed to in writing. It is the intention and
agreement of the Parties hereto that this Trust Deed be legally binding and
enforceable and shall comply with all applicable Laws. To the extent that any
provision of this Trust Deed is declared non-enforceable, ambiguous, severable
or contradictory, and to the extent it is commercially reasonable, said
provision and this Trust Deed shall be deemed amended with such terms and
conditions as to enforce the intention, terms and provisions of this Trust Deed.
Each Party agrees to and shall perform any further acts and execute and deliver
any further documents which may be necessary to carry out the provisions of this
Trust Deed. This Trust Deed may be executed in any number of counterparts. Each
shall be deemed an original and all shall constitute the same Trust Deed. The
failure of any or all parties to initial each or any page of, or to fill in or
otherwise complete any blank in, this Trust Deed shall not in any way affect its
enforceability or validity.
11. In accordance with Section 2924b of the California Civil Code, request is
hereby made by Beneficiary that a copy of any Notice of Default and a copy of
any Notice of Sale and any similar instrument be mailed to the Beneficiary at
the above set forth address. NOTICE: A copy of any notice of default and of any
notice of sale will be sent only to the address contained in this recorded
request. If your address changes, a new request must be recorded.
IN WITNESS HEREOF, the Deed Trust has been executed as of the dates set forth
below and within the county of Los Angeles, State of California.
Signature of Trustor
Pacific Video, Inc.
a Delaware Corporation
Execution Date: July ___, 1997
By: __________________________
James R. Parks,
Chairman and CEO
By: _________________________
Robert McClain,
Chief Financial Officer
See next page for notary acknowledgments
<PAGE>
STATE OF CALIFORNIA )
)ss
COUNTY OF LOS ANGELES )
On ___________________, 1997 before me, ___________________________, Notary
Public in and for said State, personally appeared JAMES R. PARKS, personally
known to me [or] [proven to me on the basis of satisfactory evidence] to be the
person(s) whose name is/are subscribed to the within instrument and acknowledged
that he/she/they executed the same in his/her/their authorized capacity, and
that by his/her/their signature on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal. (Seal)
Signature:___________________________
STATE OF CALIFORNIA )
)ss
COUNTY OF LOS ANGELES )
On ___________________, 1997 before me, __________________________, Notary
Public in and for said State, personally appeared ROBERT MCCLAIN, personally
known to me [or] [proven to me on the basis of satisfactory evidence] to be the
person(s) whose name is/are subscribed to the within instrument and acknowledged
that he/she/they executed the same in his/her/their authorized capacity, and
that by his/her/their signature on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal. (Seal)
Signature:___________________________
<PAGE>
EXHIBIT "A"
TO
DEED OF TRUST
Legal Description of Property
EXHIBIT "A"
TO
DEED OF TRUST
Legal Description of Property
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES AND IS DESCRIBED AS FOLLOWS:
LOTS 5, 6, 7, 8, 10 AND 11 OF TRACT 4427, IN THE CITY OF LOS ANGELES, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 48,
PAGE(S) 65 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL NO(S): 5533-24-2
5533-24-3
5533-24-4
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Agreement") is made as of July ___, 1997
by LASER-PACIFIC MEDIA CORPORATION, a Delaware corporation ("Laser"), and
PACIFIC VIDEO, INC., a Delaware corporation ("Pacific Video"; and, collectively
with Laser, "Grantor"), on the one hand, in favor of ALAN PICK ("Grantee"), an
individual as Trustee for the benefit of the beneficial holders of Laser's
Short-Term Installment (Fixed Rate) Line of Credit Notes, Series 1997, on the
other hand, with reference to the following facts:
A. Laser is the legal and beneficial owner of 876,416 shares of the common
stock (the "Laser Shares") of Pacific Video Canada Ltd., a Canadian corporation
incorporated in the province of British Columbia (the "Corporation"). Pacific
Video is the legal and beneficial owner of 1,548,072 shares of the common stock
(the "Pacific Video Shares"; and, collectively with the Laser Shares, the
"Shares") of the Corporation.
B. Pacific Video is a wholly-owned subsidiary of Laser.
C. Concurrently herewith, Grantor is executing and delivering its Short-
Term Installment (Fixed Rate) Line of Credit Notes, Series 1997 to Grantee
(collectively, the "Notes").
D. In order to secure Laser's obligations under the Notes, Grantor hereby
desires to pledge the "Collateral" (as such term is hereafter defined) to
Grantee on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in order to induce Grantee to enter into the transactions
contemplated by the Notes, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Grantor hereby
represents, warrants, covenants, agrees and pledges as follows:
1. Definitions. In addition to capitalized terms otherwise defined herein,
the following terms shall have the meanings respectively set forth after each.
"Certificates" means all certificates, instruments or other documents now
or hereafter representing or evidencing any Pledged Securities.
"Event of Default" means (i) any event of default under the terms of this
Agreement or the Notes, or (ii) any statement, representation or warranty made
by Grantor herein or in any other document, instrument or agreement between
Grantor and Grantee is untrue in any material respect as of the date made.
"Obligations" means any and all obligations of Laser to Grantee under the
Notes, whether presently existing or hereafter arising.
"Collateral" means the Pledged Securities, the Certificates representing
or evidencing the same, any and all proceeds and products of any of the
foregoing, and any and all collections, dividends, distributions, redemption
payments, or liquidation payments with respect to the foregoing.
"Pledged Securities" means the Shares and any and all securities now or
hereafter issued in substitution, exchange or replacement therefor or with
respect thereto.
2. Pledge. Grantor, as security for the full and timely payment and
performance of all of the Obligations, hereby pledges and grants to Grantee a
continuing security interest in and lien upon, and mortgages, pledges and
assigns to Grantee for security purposes, all Collateral, together with any and
all products and proceeds thereof, dividends thereon, and rights, titles,
interests, privileges, benefits and preferences appurtenant or incidental
thereto.
2.1 Delivery of Certain Collateral. Concurrently upon execution of
this Agreement, Grantor shall cause the Collateral to be pledged and delivered
to Grantee or any person or entity designated by Grantee. All Certificates at
any time delivered to Grantee shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Grantee.
2.2 Further Assurances. Grantor agrees that, at any time and from time
to time, at Grantor's expense, Grantor will promptly execute, deliver and file
<PAGE>
or record all further financing statements, instruments and documents, and will
take all further actions, including, without limitation, causing the Corporation
to so execute, deliver, file or take other actions that may be necessary or
desirable, or that Grantee may request, in order to perfect and protect any
pledge or security interest granted hereby or to enable Grantee to exercise and
enforce its rights and remedies hereunder with respect to any Collateral and to
preserve, protect and maintain the Collateral and the value thereof. Grantor
hereby consents and agrees that the issuers of, or obligors on, the Collateral,
or any registrar or transfer agent or trustee for any of the Collateral, shall
be entitled to accept the provisions hereof as conclusive evidence of the right
of Grantee to effect any transfer or exercise any right hereunder,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Grantor or any other individual or entity to such issuers or
such obligors or to any such registrar or transfer agent or trustee.
3. Voting Rights; Dividends. So long as no Event of Default has occurred
and is continuing:
3.1 Voting Rights. Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Securities, or any
part thereof, for any purpose not inconsistent with the terms of the Notes.
3.2 Dividend and Distribution Rights. Grantor shall be entitled to
receive, retain and use any and all cash dividends or distributions paid in
respect of the Pledged Securities.
4. Rights During Event of Default. When an Event of Default has occurred
and is continuing:
4.1 Voting, Dividend, and Distribution Rights. At the option of
Grantee, all rights of Grantor to exercise the voting and other consensual
rights which Grantor would otherwise be entitled to exercise, and to receive the
dividends and distributions which it would otherwise be authorized to receive
and retain, shall cease, and all such rights shall thereupon become vested in
Grantee who shall thereupon have the sole right to exercise such voting and
other consensual rights, to receive and to hold as Collateral such dividends and
distributions, and to use the Collateral to satisfy any outstanding Obligations.
4.2 Dividends and Distribution Held in Trust. All dividends and other
distributions which are received by Grantor contrary to the provisions hereof
shall be received in trust for the benefit of Grantee, shall be segregated from
other funds of Grantor, and shall forthwith be paid over to Grantee as
Collateral in the same form as so received (with any necessary endorsements).
4.3 Irrevocable Proxy. Grantor hereby revokes all previous proxies
with regard to the Pledged Securities and appoints Grantee as Grantor's
proxyholder to attend and vote at any and all meetings of the shareholders of
the Corporation, and any adjournments thereof, held on or after the date of the
giving of this proxy and prior to the termination of this proxy and to execute
any and all written consents of shareholders of the Corporation executed on or
after the date of the giving of this proxy and prior to the termination of this
proxy, with the same effect as if Grantor had attended the meetings or had voted
his shares or had signed the written consents. Grantor hereby authorizes Grantee
to substitute another person as the proxyholder and, upon the occurrence or
during the continuance of any Event of Default, hereby authorizes and directs
the proxyholder to file this proxy and the substitution instrument with the
secretary of the Corporation. This proxy is coupled with an interest and is
irrevocable until such time as all Obligations have been paid and performed in
full.
5. Transfers and Other Liens. Grantor agrees that it will not (i) sell,
assign, exchange, transfer or otherwise dispose of, or contract to sell, assign,
exchange, transfer or otherwise dispose of, or grant any option with respect to,
any of the Collateral, (ii) create or permit to exist any lien upon or with
respect to any of the Collateral, except for liens in favor of Grantee, or (iii)
take any action with respect to the Collateral which is inconsistent with the
provisions or purposes of this Agreement or the Notes. Grantor agrees further
that it will not sell, exchange, transfer or otherwise dispose of, or contract
to sell, assign, exchange, transfer or otherwise dispose of, or grant any option
with respect to, any other shares of capital stock of the Corporation legally or
beneficially owned by Grantor, if the direct or indirect result thereof would
be to affect or limit in any way the ability of Grantee or any other legal or
beneficial owner of the Pledged Securities to sell, exchange, transfer, dispose
of or otherwise realize upon all or any part of the Pledged Securities pursuant
any federal or state securities laws, including, without limitation, Rule 144
promulgated under the Securities Act of 1933, as amended.
6. Grantee Appointed Attorney-in-Fact. Grantor hereby irrevocably appoints
Grantee as its attorney-in-fact, with full authority in his place and stead, and
in its name, or otherwise, from time to time, in Grantee's sole and absolute
discretion to do any of the following acts or things: (a) to do all acts and
<PAGE>
things and to execute all documents necessary or advisable to perfect and
continue perfected the security interests created by or granted under this
Agreement and to preserve, maintain and protect the Collateral; (b) to do any
and every act which Grantor is obligated to do hereunder; (c) to prepare, sign,
file and record, in Grantor's' name, any financing statement covering the
Collateral; and (d) to endorse and transfer the Collateral upon foreclosure by
Grantee; provided, however, that Grantee shall be under no obligation whatsoever
to take any of the foregoing actions, and Grantee shall have no liability or
responsibility for any act (other than solely as a result of Grantee's own gross
negligence or willful misconduct) or omission taken with respect thereto.
7. Grantee May Perform Obligations. If Grantor fails to perform any
obligation contained herein, Grantee may, but without any obligation to do so
and without notice to or demand upon Grantor, perform the same and take such
other action as Grantee may deem necessary or desirable to protect the
Collateral or Grantee's security interest therein.
8. Maintenance and Inspection Rights. At all times, Grantor shall maintain,
and provide Grantee and its Representatives for inspection and copying, in a
rompt and complete manner, all documents and other instruments related to this
Agreement, the Notes and the other documents, instruments and agreements
contemplated hereby, and permit and provide for Grantee and its Representatives
to discuss with Grantor and its Representatives all related information.
9. Events of Default and Remedies.
9.1 Rights Upon Event of Default. Upon the occurrence and during the
continuation of an Event of Default, Grantee shall have in any jurisdiction
where enforcement is sought, in addition to all other rights and remedies that
Grantee may have hereunder or under the Notes and under applicable law or in
equity, all of its rights and remedies as a secured party under the Uniform
Commercial Code as enacted in any such jurisdiction, and all of the following
rights and remedies, all of which may be exercised with or without further
notice to Grantor:
9.1.1 to receive all dividends and other payments on the
Collateral; to renew, extend, modify, amend, accelerate, or accept partial
payments on, make allowances and adjustments and issue credits with respect to
and release, settle, compromise, compound, collect or otherwise liquidate, in
whole or in part, the Collateral and any amounts owing thereon or any guaranty
or security therefor; to enter into any other agreement relating to or affecting
the Collateral; and to give all consents, waivers and ratifications with respect
to the Collateral and exercise all other rights (including voting rights),
powers and remedies and otherwise act with respect thereto as if it was the
owner thereof;
9.1.2 to enforce payment and prosecute any action or proceeding
with respect to any and all of the Collateral and take or bring, in its name or
in the name of Grantor all steps, actions, suits or proceedings deemed by it to
be necessary or desirable to effect collection of or to realize upon the
Collateral;
9.1.3 in accordance with applicable law, to take possession of
the Collateral not theretofore delivered to it with or without judicial process;
9.1.4 to endorse, in the name of Grantor, all checks, notes,
drafts, money orders, instruments and other evidences of payment relating to the
Collateral;
9.1.5 to transfer any or all of the Collateral into its name or
its nominee or nominees; and
9.1.6 in accordance with applicable law, to foreclose upon the
liens and security interests created hereunder or under any other agreement
relating to the Collateral by any available judicial procedure or without
judicial process, and to sell, assign or otherwise dispose of the Collateral or
any part thereof, either at public or private sale or at any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or on future
delivery, or otherwise, with or without representations or warranties, and upon
such terms as shall be acceptable to it;
all at the sole option of and in the sole discretion of Grantee.
9.2 Sale of Collateral. Any sale of the Collateral shall be held at
such time or times and at such place or places as Grantee may determine in the
exercise of its sole and absolute discretion. Grantee may bid (which bid may be,
in whole or in part, in the form of cancellation of the Obligations) for and
purchase for the account of Grantee or any nominee of Grantee, the whole or any
part of the Collateral. Grantee shall not be obligated to make any sale of the
Collateral if it shall determine not to do so regardless of the fact that notice
of sale of the Collateral may have been given. Grantee may, without notice or
<PAGE>
publication, adjourn the sale from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned.
9.3 Private Sales. Whether or not any of the Collateral has been
effectively registered under the Securities Act of 1933, as amended, or other
applicable laws, Grantee may, in its sole and absolute discretion, sell all or
any part of the Collateral at private sale in such manner and under such
circumstances as Grantee may deem necessary or advisable in order that the sale
may be lawfully conducted. Without limiting the foregoing, Grantee may (i)
approach and negotiate with a limited number of potential purchasers, and (ii)
restrict the prospective bidders or purchasers to persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or resale thereof. In the
event that any of the Collateral is sold at private sale, Grantor agrees that if
the Collateral is sold for a price which Grantee in good faith believes to be
reasonable, then (A) the sale shall be deemed to be commercially reasonable in
all respects, (B) Grantor shall not be entitled to a credit against the
Obligations in an amount in excess of the purchase price, and (C) Grantee shall
not incur any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Grantor recognizes that a ready market may not
exist for Collateral, and that a sale by Grantee of any such Collateral for an
amount substantially less than a pro rata share of the fair market value of the
issuer's assets minus liabilities may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell the Collateral.
9.4 Title of Purchasers. Upon consummation of any sale of Collateral
pursuant hereto, Grantee shall have the right to assign, transfer and deliver to
the purchaser or purchasers thereof the Collateral so sold. Each such purchaser
at any such sale shall hold the Collateral sold absolutely free from any claim
or right on the part of Grantor, and the Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and appraisal which
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. If the sale of all or any part of the
Collateral is made on credit or for future delivery, Grantee shall not be
required to apply any portion of the sale price to the Obligations until such
amount actually is received by Grantee, and any Collateral so sold may be
retained by Grantee until the sale price is paid in full by the purchaser or
purchasers thereof. Grantee shall not incur any liability in case any such
purchaser or purchasers shall fail to pay for the Collateral so sold, and, in
case of any such failure, the Collateral may be sold again.
9.5 Disposition of Proceeds of Sale. The net cash proceeds resulting
from the collection, liquidation, sale or other disposition of the Collateral
shall be applied, first, to the costs and expenses (including reasonable
attorneys' fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting and liquidating the Collateral, and the like; second,
to the satisfaction of all the Obligations, with application as to any one of
the Obligations to be in the order determined by Grantee in its sole and
absolute discretion; and, third, to Grantor.
10. Indemnity. Grantor shall indemnify, defend, protect, reimburse and hold
harmless Pledgee, each Holder and their Representatives (collectively
"Indemnitee:Indemnitees") for, from and against all Claims, now or in the
future, concerning, relating to or as a result of the Grantee acceptance of the
Collateral or the exercise of any rights or remedies related thereto, except for
any Claims due to any Indemnitee's negligence or intentional wrongdoing
Indemnity Claims:.
11. Satisfaction of the Obligations. Upon satisfaction in full of the
Obligations, Grantee shall deliver to Grantor the Certificates, and this
Agreement shall be of no further force or effect.
12. Representations and Warranties. In order to induce the holders of the
Notes to make the loans contemplated by the Notes, and without regard to any act
or knowledge of Grantee, any such holders or any of their representatives, Laser
and Pacific Video each hereby makes the following warranties and representations
for the benefit of Pledgee and Holders, upon which the Pledgee can reasonably
and justifiably rely upon in making the Loan, each of the following:
12.1 Laser is a duly organized and validly existing corporation in
good standing under the laws of the State of Delaware, has all necessary
corporate powers, licenses and permits to own and operate its assets and to
carry on its businesses as now owned and operated by it, and is duly qualified
to do business and is in good standing in all jurisdictions in which Laser is
required to be qualified to do business. Pacific Video is a duly organized and
validly existing corporation in good standing under the laws of the State of
Delaware, has all necessary corporate powers, licenses and permits to own and
operate its assets and to carry on its businesses as now owned and operated by
it, and is duly qualified to do business and is in good standing in all
<PAGE>
jurisdictions in which Pacific Video is required to be qualified to do business.
12.2 Each Grantor has good and marketable title to the Collateral held
of record by such Grantor, free and clear of all other liens, encumbrances,
adjustments, offsets, assessments, security interests and other Claims of any
kind or nature other than the security interest of Grantee and that upon
delivery of the Collateral to Grantee, the security interest hereby created in
such Collateral is a fully perfected first priority security interest in and to,
and enforceable against, such Collateral.
12.3 The execution, delivery and performance of this Agreement, the
Notes and all other contemplated agreements and instruments to be delivered to
Grantee in connection therewith by each Grantor have been duly authorized by all
requisite action on the part of such Grantor, and this Agreement and all such
other documents, instruments and agreements, together with all transactions
contemplated hereby and thereby, are not, and will not be, in conflict with or
result in any breach of, or constitute a default under, any indenture or any
other security or other agreement, instrument or understanding to which either
Grantor is a party or by which either Grantor, or any of their respective
assets, may be bound or affected; and, to the best of Grantor's knowledge, are
not, or will not be, in violation of any provision of any Law; and are not, or
will not be, in conflict with or in any way violate any of the terms of the
Certificate of Incorporation or by-laws of Grantor, and the pledge of the
Collateral does not require any qualification, registration or any other
approval of any other Person in order to be pledged hereunder or sold,
transferred or otherwise disposed of as herein provided.
12.4 This Agreement and the documents, instruments and agreements
contemplated by this Agreement to which each Grantor is a party constitute the
valid and binding obligation of such Grantor, enforceable against Grantor in
accordance with their respective terms
13. Miscellaneous.
13.1 Except as otherwise explicitly provided herein, this Agreement
together with all exhibits hereto and referenced contemporaneous agreements and
other instruments shall constitute the entire and final understanding of the
Parties, and shall supersede all prior understanding, as to the subject matter
herein stated. This Agreement may be modified or amended only in writing signed
by all the parties.
13.2 This Agreement shall be interpreted under and governed by the
Laws of California, without giving effect to any conflict of laws principles,
except as preempted or otherwise controlled by any applicable Federal Law, in
which case such Federal Law shall apply. This Agreement shall wherever possible
be given a reasonable, practical and workable interpretation. Time is of the
essence of every provision of this Agreement, and unless stated otherwise, the
reasonable time required in which to perform any act shall be ten (10) business
days. Unless explicitly subsequently otherwise provided in writing, any conflict
between this Agreement, any of the other Agreements, any other agreement or
instrument, or contrary conduct shall be resolved in favor first of perfecting
and maintaining all security interests, then all security agreements, and then
the Note, with each specific provision controlling over any general or other
provision. This Agreement is the product of the joint efforts and arm's length
negotiations of all Parties, has been jointly drafted by the parties, and shall
be construed accordingly. No party shall be entitled to any advantage due to
another party's legal or other representation or preparation of this Agreement.
All Exhibits attached hereto are incorporated herein. Headings are for
convenience only and not to be considered part of the Agreement. As used herein,
the masculine, the feminine or the neuter genders and the singular or plural
number shall be deemed to mean and/or include the others wherever the context of
any clause in this Agreement so indicates or is reasonable. It is the intention
and agreement of the parties hereto that this Agreement (and all other
contemplated agreements and instruments) be legally binding and enforceable and
to the extent that any provision of this Agreement (or any other contemplated
agreement and instrument) is declared unenforceable, ambiguous, severable,
contradictory or otherwise deficient or if there is any clerical or similar
errors, such as misspelled words, miscalculations, or proofreading, computer or
printing errors, and to the extent it is commercially reasonable, said provision
and this Agreement (and the other contemplated agreements and instruments) shall
be deemed amended with such terms and conditions as to enforce the intended
terms and consequences of this Agreement, or as appropriate, severed without any
affect on the remaining provisions.
13.3 As used herein, certain capitalized words shall have the meaning
as herein provided, including the following definitions, and if not provided
herein then as provided in the other contemporaneous agreements. Any conflict
between said capitalized words and any other meaning shall be resolved as herein
provided. As used herein and except as herein otherwise explicitly provided, the
term "Claim(s)" shall mean and include, as reasonable and applicable, all claims
(including all rights of subrogation) disputes, liabilities, debts, obligations,
<PAGE>
losses, damages (including all actual, general, compensatory, consequential,
special, incidental, punitive or otherwise), demand, actions, judgments, orders,
fines, penalties, forfeitures, liens, other encumbrances, costs (including all
investigation and remedial costs), other charges, expenses (including all
attorneys' fees and costs), and any other similar item, whether known, unknown,
suspected or unsuspected, foreseeable, unforeseeable, absolute, contingent,
liquidated, non-liquidated, direct, indirect, derivative, compensatory, special,
punitive or otherwise. As used herein, the terms: (i) a "day" is a calendar
day and (ii) a "business day" is a calendar day other than a Saturday or Sunday
upon which the Office of the County Recorder of Los Angeles County is open and
accepting documents for recording and the state and federal banks are generally
open for business. If provided herein that a party must act by a particular
time, or an act is effective only if done by a particular time, and the last
date for the doing or effectiveness of such act falls upon a day other than a
business day, the time for the doing or effectiveness of such act shall be
extended to the next succeeding business day. As used herein, the term "herein,"
or any variation thereof, shall mean any where within this Agreement or as
otherwise applicable within a particular section of this Agreement. As used
herein, the term "including", or any variation thereof, shall be construed as if
followed by the phrase "without any limitation". As used herein, the term "Law"
shall mean all applicable (except as herein otherwise excluded) statutory,
regulatory, administrative, common, at equity, decisional laws, regulations,
ordinances, rules, directives, orders, judgments, decrees, determinations,
writs, decisions, other judicial, administrative, and other governmental
determinations, reasonably affecting the respective provision of this Agreement
and the respective contemplated transaction, whether imposed by federal, state,
county, municipal or other governmental authority. As used herein, "Person" or
any variation thereof, shall mean any person, trust, corporation, partnership,
limited liability company, other entity or governmental or quasi-governmental
agency or body. As used herein, the term a party's "Representative(s)" shall
mean and include, as reasonable and applicable, the respective party's spouse,
heirs, executors, administrators, beneficiaries, trustees, receivers, assigns,
successors, owners, investors, partners, parent companies, subsidiaries,
shareholders, directors, officers, employees, servants, representatives, agents,
affiliates, professional advisors and any other similar or related persons, and
each of their respective Representatives.
13.4 Except as otherwise herein explicitly provided, the non-
enforceability of one provision hereof shall not affect the remaining
provisions. The receipt of any part payment or performance due hereunder shall
not be deemed a waiver of any default or the modification of any provision
hereof. No failure or delay on the part of any party in exercising any rights or
remedies hereunder shall operate as a waiver thereof or of any other right or
remedy, nor will acceptance of any performance hereunder preclude any further
exercise of any rights or remedies hereunder. All waivers shall be in writing
to be effective. The failure of any or all Parties to initial each or any page,
or to fill in or otherwise complete any blank in this Agreement shall not in any
way affect its enforceability or validity.
13.5 All the warranties and representations of Grantor and all
indemnification obligations shall survive any termination of this Agreement
unless and until first otherwise extinguished by operation of Law or by any
subsequent mutual and written agreement of the parties.
13.6 Notwithstanding anything to the contrary, before any default or
breach can be declared hereunder against any party and to the extent written
demand has not been so made, at least a thirty (30) day (unless another period
of time is explicitly provided) prior notice and opportunity to cure demand
shall be made of such a party. Grantee agrees to look solely to the assets of
Laser for recovery of any damages, losses or claims and not to any of the
personal assets of any of its Representatives. In the event any party institutes
any legal action to collect or otherwise enforce any provision of this
Agreement, the prevailing party shall be entitled to reasonable attorney fees
and costs.
13.7 The parties agree that any disputes concerning this Agreement
shall be litigated, whether by a court or by arbitration, only within the County
of Los Angeles, California, which the parties agree for jurisdictional purposes
is the place where this Agreement has been entered into and where it will be
substantially performed.
13.8 All notices and demands, all responses thereto and any other
instruments of any kind (collectively "Notices"), which any party may require,
or desires, to be provided or served on any party shall be written, dated, state
its purpose and the time during which to respond, and served on the respective
parties at the addresses set forth on the signature pages hereto or as may
otherwise be directed in writing. Service shall be deemed made, and received, if
personally, at the time of such service: if by certified or registered mail,
within three (3) business days after deposited in the United States mail within
the state of California, or within five (5) business days after deposited in the
United States mail outside of the state of California, provided postage is
prepaid and the Notice is properly addressed; if by courier or overnight service
<PAGE>
(such as Federal Express, DHL or UPS), at the time the agency confirms delivery;
and if by telegraph, telefacsimile or telex, at the time the machine or agency
confirms delivery, provided that within two (2) business days thereafter the
original thereof shall have been sent by mail (as herein provided) to the party
to whom such Notice was directed. All Notices shall be deemed deposited for mail
purposes as of the date of its postmark. Refusal of acceptance of any Notice
served in accordance herewith shall not affect the service thereof as otherwise
provided herein. Each party hereto shall promptly give notice to each other
party of any change of its address or number. If such change notice is not
served, the notifying party(s) shall be entitled to rely upon the address and
numbers herein last provided.
13.9 This Agreement may be executed in any number of counterparts and
each shall be deemed an original and all shall constitute the same agreement.
Signature and acknowledgment pages may be detached from the counterparts and
attached to a single copy of this document to form physically one document,
which may be recorded. A faxed or other duplicated copy of this Agreement may be
executed as an original and a faxed or other duplicated copy of the executed
Agreement may be accepted and relied upon as if it were an executed original.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first above written.
LASER-PACIFIC MEDIA CORPORATION
By:_____________________________
Its:____________________________
PACIFIC VIDEO, INC.
By:_____________________________
Its:____________________________
AGREED AND ACCEPTED:
______________________________
ALAN PICK, as Trustee for
the benefit of the beneficial holders
of Laser-Pacific Media
Corporation's Short-Term
Installment (Fixed Rate) Line
of Credit Notes, Series 1997
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On _________________________ before me, _____________________, personally
appeared __________________ and _________________, personally known to me or
proved to me on the basis of satisfactory evidence to be the persons whose names
are subscribed to the within instrument and acknowledged to me that he/she
executed the same in their authorized capacities, and that by his/her signature
on the instrument the person or entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
__________________________
Notary Public
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On _________________________ before me, _____________________, personally
appeared ________________ and ________________, personally known to me or proved
to me on the basis of satisfactory evidence to be the persons whose names are
subscribed to the within instrument and acknowledged to me that he/she executed
the same in their authorized capacities, and that by his/her signature on the
instrument the person or entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
__________________________
Notary Public
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On _________________________ before me, _____________________, personally
appeared ________________, personally known to me or proved to me on the basis
of satisfactory evidence to be the persons whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person or entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
__________________________
Notary Public
GUARANTY
THIS GUARANTY is made as of July ___, 1997 by PACIFIC VIDEO, INC., a
Delaware corporation ("PV"), LASER EDIT, INC., a Delaware corporation ("LE"),
and PACIFIC FILM LABS, INC., a Delaware corporation ("PFL"; and collectively
with PV and LE, "Guarantors"), to and in favor of ALAN PICK ("Trustee"), an
individual as Trustee for the benefit of the beneficial holders of Laser's
Short-Term Installment (Fixed Rate) Line of Credit Notes, Series 1997, whose
mailing address is 523 Sixth Street, Suite 1134, Los Angeles, California 90014,
phone number (213) 624-1996, and fax number (213) 624-9073, with reference to
the following facts:
A. Concurrently herewith, Laser-Pacific Media Corporation, a Delaware
corporation ("Laser"), is executing and delivering its Short-Term Installment
(Fixed Rate) Line of Credit Notes, Series 1997 to Trustee (collectively, the
"Notes").
C. Each Guarantor is a wholly-owned subsidiary of Laser.
D. In order to secure the timely repayment of the Notes by Laser, Trustee
is requiring that Guarantors enter into this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Guarantors hereby agree for the
express benefit of Trustee as follows:
1. Subject to the terms and conditions of this Guaranty, Guarantors
hereby irrevocably and unconditionally guarantee to Trustee the prompt and
timely repayment in full of the Notes, or so much thereof as may be advanced and
be outstanding, by Laser and the prompt and timely performance by Laser of all
of Laser's obligations to Trustee, whether direct or indirect, absolute or
contingent, due or to become due or now existing or hereafter arising, which may
arise under, out of, or in connection with, the Notes or any document,
instrument or agreement evidencing or entered into in connection with the Notes
(collectively, the "Guaranteed Obligations"). Guarantors further agree that the
Guaranteed Obligations may be increased, modified, amended or otherwise changed,
in whole or in part, without notice or further assent from Guarantors, and that
Guarantors will remain bound upon this Guaranty notwithstanding any increase,
modification, amendment or other change of any Guaranteed Obligations.
Guarantors hereby agree that, subject to the immediately succeeding paragraph,
this Guaranty constitutes a guaranty of prompt and punctual performance and
payment when due and not of collection and that its obligations hereunder are
absolute, unconditional, irrevocable, present and continuing. This is a
continuing guaranty and Guarantors agree that they shall remain in full force
and effect until all of the Guaranteed Obligations have been fully performed.
The obligations of Guarantors pursuant to this Guaranty are secured by the
following (collectively, the "Security"): (i) a first priority lien on all
right, title and interest of PV in and to 1,548,072 shares of the common stock
of Pacific Video Canada Ltd., a Canadian corporation incorporated in the
province of British Columbia, currently held by PV, pursuant to the terms of the
Stock Pledge Agreement of even date herewith by and among Laser, PV and Trustee;
and (ii) a third priority lien on certain real property owned by PV located at
823-825 North Seward Avenue, Hollywood, California, pursuant to the terms of the
Deed of Trust With Assignment of Rents and Request for Special Notice of even
date herewith by PV for the benefit of Trustee. Notwithstanding anything to the
contrary contained herein, in no event shall PV have any liability under this
Guaranty in excess of the Security, and in no event shall Trustee have any
rights, recourse or remedy under this Guaranty against any property, rights,
interests or assets of PV other than, or in addition to, the Security.
2. Guarantors hereby acknowledge that the obligation of Guarantors
hereunder involves the guaranty of obligations of an entity other than
Guarantors and, in full recognition of that fact, Guarantors consent and agree
that, at any time and from time to time, in Trustee's sole and absolute
discretion, without notice or demand, and without affecting the enforceability
or continuing effectiveness hereof, Trustee shall be permitted to: (a)
supplement, modify, amend, extend (including an extension beyond the original
term thereof), renew, waive, discharge or otherwise change the terms of any
document, instrument or agreement evidencing or entered into in connection with
the Notes (collectively, the "Notes Documents"); (b) vary, exchange, release (by
operation of law or otherwise), discharge (wholly or partially), fail to
perfect, enforce, subordinate, transfer and/or fail to advance (i) any security
or other guaranty now or hereafter held for the Guaranteed Obligations or any
<PAGE>
part thereof, or (ii) any other means of obtaining payment of any of the
Guaranteed Obligations which Trustee now has or hereafter acquires; (c) accept
partial performance of the Guaranteed Obligations from Laser or any third party;
(d) release (by operation of law or otherwise) or discharge (wholly or
partially) any third party from any personal liability with respect to the
Guaranteed Obligations or any part thereof; (e) compromise, release (by
operation of law or otherwise), liquidate, fail to enforce any of the Guaranteed
Obligations or make any settlement or other arrangement with Laser or any other
third party with respect to the Guaranteed Obligations; (f) enter into or give
any agreement, approval or consent with respect to the Guaranteed Obligations
or any part thereof or any security or other guaranties now or hereafter held
therefor; (g) accept new or additional instruments, documents or agreements in
exchange for or relative to the Guaranteed Obligations or any part thereof; (h)
receive and hold any security or other guaranties for the Guaranteed Obligations
or any part thereof; and (i) substitute, exchange, amend, or alter any security
or other guaranty now or hereafter held for the Guaranteed Obligations or any
part thereof, whether or not the security or other guaranty received upon the
exercise of such power is of a character or value which is the same as the
character or value of the item of security or guaranty so affected. Nothing
contained in this Guaranty shall alter or modify in any way the respective
rights and obligations of the parties under the Notes Documents.
3. a. Upon the occurrence and during the continuance of any default in
the performance of the Guaranteed Obligations, Trustee may enforce this Guaranty
independently as to each Guarantor and independently of any other remedy or
security which Trustee may, at any time, have in connection with the Guaranteed
Obligations. Guarantors expressly waive any right to require Trustee to proceed
against Laser, any other guarantor or any collateral provided by any third party
and agree that Trustee may proceed against each Guarantor and/or any collateral
in such order as it shall determine in its sole and absolute discretion. The
rights of Trustee created or granted herein and the enforceability of this
Guaranty at all times shall remain effective to guaranty the full performance of
all of the Guaranteed Obligations even though the Guaranteed Obligations (or any
portion thereof) or any security or guaranty therefor, may be or may hereafter
become invalid or otherwise unenforceable as against Laser or any other
guarantor and whether or not any other guarantor shall have any personal
liability with respect thereto. Guarantors expressly waive any and all defenses
now or hereafter arising or asserted by reason of:
(i) any lack of authority, dissolution or other incapacity of
Laser, any other guarantor or any third party with respect to the Guaranteed
Obligations or any part thereof; or
(ii) the unenforceability or invalidity of any collateral or
other guaranties for the Guaranteed Obligations or the lack of perfection or
continuing perfection or failure of priority of any such collateral or any part
thereof; or
(iii) the cessation, for any cause whatsoever, of the obligations
of Laser or any other guarantor; or
(iv) any failure of Trustee to marshal assets in favor of
Guarantors or any third party; or
(v) any act or omission of Trustee that directly, indirectly, by
operation of law or otherwise results in or aids the discharge or release of
Laser, any other guarantor or any collateral for the Guaranteed Obligations or
any guaranties now or hereafter held for the Guaranteed Obligations or any
portion thereof; or
(vi) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation and all other rights, defenses and
benefits limiting the liability of or exonerating guarantors or sureties offered
by law; or
(vii) any failure of Trustee to file or enforce a claim in any
bankruptcy or other proceeding with respect to any person or entity (including,
but not limited to Laser); or
(viii) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against any person or entity, including any discharge of, or bar or stay against
enforcing or collecting, all or any of the Guaranteed Obligations in or as a
result of any such proceeding; or
(ix) any action taken by Trustee that is authorized by this
Section 3 or any other provision of this Guaranty; or
(x) any election of remedies by Trustee which destroys or
<PAGE>
otherwise impairs the subrogation rights of Guarantors or the right of
Guarantors to proceed against Laser for reimbursement, or both; or
(xi) any other principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms hereof.
Guarantors expressly waive all set-offs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance;
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Guaranteed
Obligations, and all notices of acceptance of this Guaranty or of the existence,
creation or incurring of new or additional Guaranteed Obligations.
b. Guarantors hereby irrevocably waive, with respect to
Laser, its successors and assigns, any and all rights of subrogation,
reimbursement, exoneration, contribution or set-off, any and all rights to
participate in any claim or remedy of Trustee against Laser or any collateral
for the Guaranteed Obligations, and any and all other rights that could accrue
to a surety against a principal, and which Guarantors may have or hereafter
acquire against Laser, at law or in equity, in connection with or as a result of
Guarantors' execution, delivery and/or performance of this Guaranty. Guarantors
shall not, at any time hereafter, have or assert any such claims or rights
against Laser either directly or as an attempted set-off to any action commenced
against Guarantors by Laser or Trustee. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, AS CONTEMPLATED BY SECTION 2856 OF THE CALIFORNIA CIVIL CODE,
GUARANTORS HEREBY WAIVE ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF
REMEDIES BY TRUSTEE, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS NONJUDICIAL
FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED
GUARANTORS' RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST LASER BY THE
OPERATION OF SECTION 580d OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR
OTHERWISE.
c. Guarantors acknowledge and agree that they assume the
risk of keeping informed concerning the condition, financial and otherwise, of
Laser and all other circumstances bearing upon the risk of nonperformance of the
Guaranteed Obligations. Guarantors further agree that this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
performance of the Guaranteed Obligations, or any part thereof, is rescinded or
terminated upon the bankruptcy or reorganization of Laser or any third party.
4. Guarantors hereby covenant and agree that at all times prior to the
full performance of the Guaranteed Obligations, Guarantors will promptly give
notice to Trustee in writing of any action or event of which any Guarantor has
knowledge which might materially adversely affect the performance by Guarantors
of their obligations hereunder.
5. With or without notice to Guarantors, Trustee, in its sole
discretion, at any time and from time to time and in such manner and upon such
terms as Trustee deems fit, may (a) apply any or all payments or recoveries
which may be received from Laser with respect to the Guaranteed Obligations, in
such manner as Trustee may determine, and (b)refund to Laser any payment
received by Trustee upon the Guaranteed Obligations, whereupon payment of the
amount refunded shall remain fully guaranteed hereby.
6. The obligations of Guarantors hereunder are independent of the
obligations of Laser and, in the event of any default hereunder, a separate
action or actions may be brought and prosecuted against Guarantors, whether or
not Laser is joined therein or a separate action or actions are brought against
Laser. Trustee's rights hereunder shall not be exhausted by its exercise of any
of its rights or remedies or by any such action or by any number of successive
actions until and unless the Guaranteed Obligations have been performed in full.
7. Guarantors agree that they will not seek to exercise any rights of
indemnification, contribution or exoneration from payment which they may have as
a matter of law or otherwise as against Laser so long as any of the Guaranteed
Obligations are outstanding, and if by law any right of indemnification,
contribution or exoneration from payment may not be postponed, then such right
shall be subordinate to the rights of Trustee against Guarantors hereunder.
8. This Guaranty shall terminate upon the satisfaction in full of the
Guaranteed Obligations.
9. No provisions of this Guaranty can be changed, waived, discharged
or terminated except by an instrument in writing signed by Trustee and each
Guarantor. No course of dealing or delay or omission on the part of Trustee in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto.
10. No remedy herein conferred upon or reserved to Trustee is intended
to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall in addition to every other remedy
<PAGE>
given under this Guaranty or now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power accruing upon any default,
omission or failure of performance under this Guaranty shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In the event any provision contained in this Guaranty should be
breached by any party and thereafter duly waived by the other party so empowered
to act, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
11. This Guaranty constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written or oral, among the parties
with respect to the subject matter hereof.
12. The invalidity or unenforceability of any one or more phrases,
sentences, clauses or Sections contained in this Guaranty shall not affect the
validity or enforceability of the remaining portions of this Guaranty, or any
part thereof.
13. This Guaranty shall (i) inure to the benefit of Trustee, its
successors and assigns, and (ii) bind Guarantors, their respective successors
and assigns. This Guaranty may not be assigned by Guarantors without the written
consent of Trustee.
14. This Guaranty and its construction, performance and enforcement
shall be governed by the laws of the State of California applicable to
agreements entered into and to be performed wholly therein.
15. All notices and demands, all responses thereto and any other
instruments of any kind (collectively, "Notices"), which any party may require,
or desires, to be provided or served on any party shall be written, dated, state
its purpose and the time during which to respond, and served on the respective
parties at the addresses set forth on the signature pages hereto or as may
otherwise be directed in writing. Service shall be deemed made, and received, if
personally at the time of such service: if by certified or registered mail
within three (3) business days after deposited in the United States mail within
the state of California, or within five (5) business days after deposited in the
United States mail outside of the state of California, provided postage is
prepaid and the Notice is properly addressed; if by courier or overnight service
(such as Federal Express, DHL or UPS) at the time agency confirms delivery; and
if by telegraph, telefacsimile, telex at the time the machine or agency confirms
delivery, provided that within two (2) business days thereafter the original
thereof shall have been sent by mail (as herein provided) to the party to whom
such Notice was directed. All Notices shall be deemed deposited for mail
purposes as of the date of its postmark. Refusal of acceptance of any Notice
served in accordance herewith shall not affect the service thereof as otherwise
provided herein. Each party hereto shall promptly give notice to each other
party of any change of its address or number. If such change notice is not
served, the notifying party(s) shall be entitled to rely upon the address and
numbers herein last provided.
16. Guarantors hereby agree to take such actions, and to execute and
deliver such further documents, instruments and agreements, which may be
necessary or desirable, in the reasonable determination of Trustee, to
ffectuate the intent of this Guaranty.
17. This Guaranty is entered into for the express benefit of the
parties hereto, and is not intended, and shall not be deemed, to create in any
other person (including, without limitation, Laser) any rights or interests
herein.
IN WITNESS WHEREOF, Guarantors have executed this Guaranty on the date and
year first above written.
PACIFIC VIDEO, INC.
By:___________________________
Its:__________________________
809 N. Cahuenga Blvd.
Hollywood, CA 90038
Phone No: (213) 960-2180
Fax No: (213) 960-2192
<PAGE>
LASER EDIT, INC.
By:___________________________
Its:__________________________
809 N. Cahuenga Blvd.
Hollywood, CA 90038
Phone No: (213) 960-2180
Fax No: (213) 960-2192
PACIFIC FILM LABS, INC.
By:___________________________
Its:__________________________
809 N. Cahuenga Blvd.
Hollywood, CA 90038
Phone No: (213) 960-2180
Fax No: (213) 960-2192
The CIT Group/Credit Finance
3rd Floor
300 S. Grand Avenue
Los Angeles, CA 90071
Tel: 213 613-2500
Fax: 213 613-2501
May 20, 1997
Laser Pacific Media Corporation
Laser Edit, Inc.
PDS Video Productions, Inc.
Spectra Systems, Inc.
Pacific Film Laboratories Inc.
Pacific Video, Inc.
809 North Cahuenga Blvd.
Los Angeles, California 90038
Attention: James Parks, Chief Executive Officer
RE: Loan and Security Agreements with The CIT Group/Credit Finance, Inc.
Gentlemen:
Reference is made to your respective Loan and Security Agreemtns wherein each of
you is a "Borrower" and The CIT Group/Credit Finance, Inc. is the "Lender", all
of which Loan and Security Agreements are dated August 3, 1992
(the "Agreements").
You have requested a temporary out-of-formula loan accommodation from us of
$600,000.00 ("Loan Acommodation"). Subject to the terms and conditions of the
Agreement, we are agreeable to granting you this Loan Accomodation subject to
the following conditions:
1. The Loan Accommodation is to be repaid in installments of $32,000 per week
commencing August 4, 1997 and continuing weekly until repaid in full. The Loan
Accommodation shall be fully due and payable in no event later than
December 15, 1997.
2. Initial advance under this Loan Accommodation shall be $125,000.00. The
remaining $475,000.00 shall be asdvanced in increments as Borrower recieves
third-party, cash injections (in the form of unsecured loans, equity infusions
or otherwise) equal to the advance requested.
<PAGE>
Pager 2 of 2
May 20, 1997
Repayment of the cash injections shall not be permitted until the loan
Accommodation is repaid in full.
3. In consideration for this Loan Accommodation you agree to pay a fee of
$20,000.00, in addition to any other charges under the Agreement, which shall
be charged into your loan account with us.
If all of the foregoing correctly sets forth our understanding, will each of you
please sign a copy of this letter where indicated below and return the original
of this document to the undersigned.
Very truly yours,
The CIT Group/
Credit Finance, Inc.
Gregory Badura
Vice President
All of the foregoing is hereby agreed to.
Laser Pacific Media Corporation Laser Edit, Inc.
By____________________________ By_____________________________
Title_________________________ Title__________________________
PDS Video Productions, Inc. Spectra Systems, Inc.
By____________________________ By______________________________
Title_________________________ Title___________________________
Pacific Laboratories, Inc. Pacific Video, Inc.
By____________________________ By______________________________
Title_________________________ Title___________________________
